Revision of premium under Critical illness plan

Dear Mr Tan,

I bought a critical illness plan. It has a clause that allows the insurance company to revise the premium rate in the future, subject to a cap of 1.5 times. I am worried that the cost may be unaffordable to me. What are your views?

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REPLY:

For most life insurance plans, the premium rate is guaranteed for the entire term of the contract.

The only exception is for a critical illness plan. There is a clause that allows the insurance company to revise the premium rate, if it is necessary due to an increase in claims.

The reason for this clause is:

* the plan covers several critical illnesses, such as cancer, heart failure, etc

* the insurance company is worried that the claim rate for some illnesses may increase significantly in the future (beyond what was projected in the premium rate)

* due to this uncertainty, they cannot guarantee the current premium for many years into the future

If the claim rate is kept within the current projection (which already allows for higher claim due to age), there is no need for the insurance company to revise the rate.

So far, the claim experience has been favourable. There was no need for the insurance company to revise the rate. I believe that this situation should continue into the future.