Critical illness

Dear Mr. Tan,

My annual income is around $50,000. Recently, I was recommended to buy a critical illness policy for $300,000 (to cover six years of earnings), but the premium cost about $600 per month, which takes away 15% of my salary. I cannot afford to pay so much, but I need the coverage. I need critical illness to cover my medical expenses and loss of income due to serious illness. What is your advice?

REPLY

You can buy a 30 year Decreasing Term policy to cover $300,000 for about 1% of your salary. If you save 10% of your salary and invest it in a diversified low cost fund to earn a good rate of return, you will be able to accumulate more than $300,000 over 30 years. By that time, you do not need any critical illness insurance.

You can cover most of the expenses of critical illness through a Shield policy, or the group insurance policy provided by your employer.

The chance of a critical illness occuring for a young person is very small. If you wish to cover against the occurence at a young age, you can buy a 20 year critical illness rider to cover $50,000 and pay a low premium. After 20 years, you would have accumulated more than sufficient savings to meet any loss of income.

Thsi is more cost effective than spending 15% of your income ona critical illness policy. This policy is costly due to the high commission earned by the agent, and the high charges levied by the insurance company.

Read this FAQ:
http://www.tankinlian.com/faq/choice.html
http://www.tankinlian.com/faq/savings.html