Insuring against critical illness

I recommend coverage of $50,000 for critical illness up to age 65 or earlier. Some people think that this is not adequate. Insurance agents have advised them to insure for $200,000 or more.

Here are the reasons for my recommendation:

a) The cost of treatment should be covered by a medical insurance policy.

b) The loss of income should be for a period of up to 2 years. If the illness is serious, it is likely to lead to death. If not, the patient is likely to recover.

c) There is no need to insure for loss of income beyond age 65. By that time, the person is likely to have retired from work.

The cost of critical illness coverage, based on my recommendation, is quite low. This allows the bulk of the savings to be invested in a low cost investment fund, to earn a high yield. This money is needed for retirement. There is a stronger need for adequate savings for retirement (simply because more people are expected to retire, than to suffer a critical illness).

There is high cost in buying a whole life critical illness product. About two years of the savings goes to pay the marketing expenses. This should be avoided. I shall be working out a FAQ to explain the cost structure.