Critical Illness - how to insure

Critical illness insurance for whole lfie is expensive. A male at 30 has to pay a monthly premium of about $630 to buy whole life critical illness cover for $300,000 (about 5 year's salary).

If this person buys a 25 year decreasing critical illness cover, he pays a premium of about $37 a month.

If the remaining $593 is invested in a low cost fund to earn an average of 5% per annum, the savings will accumulate to $300,000 in 23 years (i.e. at the age of 53 years). There is no need to wait for critical illness to collect $300,000. The regular investment plan will produce this amount.

At the end of 35 years, when he reaches age 65, the regular investment plan is projected to reach $643,000. This will be much more than the critical illness cover of $300,000 plus any bonus that is added to this amount.

Lesson: Buy critical illness cover for one year's salary only, on a short term basis. Insure five year's salary on a 25 year decreasing term plan. Invest about 10% to 15% of your salary in a low cost investment fund.