Coping with a critical illness

When a person meets with a critical illness, there are two financial losses:
- medical expenses to treat the critical illness
- loss of earnings

The medical expenses have to be managed in a sensible manner. I know of a few people that spent a lot of money on treating the critical illness, usually at private hospitals and specialists. In many cases, the large sum that was spent did not make any difference. If the illness was serious, the patient died.

I also know of other people who survived cancer or heart surgery. Those who were treated in a restructured hospital did not spend a lot of money as they benefited from the government subsidy. They were also covered by catastrophic insurance (i.e. MediShield or private Shield).

The best way to handle the loss of income is through personal savings that can be drawn down in an emergency. You do not need to depend on critical illness insurance to give a lump sum payment. If you put all your money in a critical illness policy, you may find your claim to be rejected for some technical reason, at a time when you need the money most. It is better to invest the savings on your own and be free of this uncertainty.

The proportion of people that suffered from a critical illness during the working life is estimated to be less than 10%. More than 90% will retire without suffering from a critical illness.

Tip: Spend less than 2% of your earnings on insurance against death or critical illness. Invest the rest of your savings in a low cost investment fund.

Read my book on "Practical Guide on Financial Planning". Spend $12 and save a lot of money (say $12,000) on wasted premiums.

Tan Kin Lian