UNRAVEL

Why do I need ECI/CI Coverage when I have Medical Insurance?

October 4, 2018

| 5 minutes read |

The "Unravel" series consist of articles that provide answers to the common questions that most of my clients have in my course of financial consulting. This series is targeted at providing consumers with a basic understanding of insurance and financial plans.

First of all, we need to understand the differences between medical insurance (i.e. your hospitalisation and surgical plan) and ECI/CI insurance. Your medical insurance (Medishield and Integrated Shield Plans) reimburses the hospitalisation bills and related expenses while ECI/CI insurance typically provides lump sum payout upon diagnosis of the conditions (ECI/CI) as defined in the policy.

So why do we still need ECI/CI coverage if our hospitalisation bills will be paid for by our medical insurance?

As Lorna Tan (Invest Editor) mentioned in her article on the Straits Times, "Having your hospital bills covered by insurance is a huge relief, but there are plenty of other expenses that can crop up in the wake of a serious illness that could leave you shelling out a fortune."

Relieving your Finances with ECI/CI Coverage

When critical illnesses strike, one's financial burden extends beyond that of hospitalisation bills. This is where your ECI/CI coverage comes in as a partner to your medical insurance - it provides a lump sum payout to ensure that you can shoulder the additional expenses associated with falling critically ill and that you do not have to fret for your regular expenses.

ECI/CI coverage comes in as a partner to your medical insurance - it provides a lump sum payout to ensure that you can shoulder the additional expenses associated with falling critically ill and that you do not have to fret for your regular expenses.

Other Expenses

While seeking treatment, you may need to employ a domestic helper to be the primary caregiver for your children or parents, and to help you with your daily chores. Depending on what treatment you are seeking, you may want to opt for a home nurse to help you with administering treatment at home. You may also require mobility aids and incur transport costs to and fro medical establishments. You may also wish to seek alternative treatments for your condition (such as supplementing your treatment with tonics or traditional chinese medicine).

You may or may not require the above. However, without the lump sum payout provided by your ECI/CI coverage, your options will definitely be limited.

Can you imagine not being able to opt for something just because you are limited by finances when you are critically ill?

Now imagine having a lump sum payout upon diagnosis - you and your family can definitely worry less and focus more on your recovery.

Can you imagine not being able to opt for something just because you are limited by finances when you are critically ill?

Income Protection

Most of us have regular expenses in our daily lives. They can be in the form of paying of loans (housing loans, renovation loans, car loans, education loans etc.), providing an allowance to our family members (parents, grandparents, children etc.), or in the form or regular bills (phone and internet bills, subscriptions, tuition fees for children etc.).

In Singapore, we are entitled to a fixed number of paid hospitalisation leave (see MOM Website) - our employers need to pay us for that stipulated period if we are "certified to be ill enough to be hospitalised in an acute hospital or national center."

But what happens if our recovery period is longer than that of our hospitalisation leave entitlement? We would not receive an income but our loans would still need to be paid off, our family members would still require their allowances and most of our regular bills would continue to roll.

The lump sum ECI/CI payout ensures that you have your income protected (or replaced). With the payout, you worry less about your period of recovery and can continue to fully finance your regular expenses.

The lump sum ECI/CI payout ensures that you have your income protected (or replaced).

Plugging the Gap: CI Coverage in Singapore

According to the Life Insurance Association (LIA), most Singaporeans fall short when it comes to critical illness coverage. As cautioned by LIA deputy president James Tan, "Individuals in Singapore are living with an average of 8 out of 82 years spent in ill-health, and this is coupled with a relatively low take-up of critical illness protection policies that help cushion the financial impact."

Based on the average annual pay of $81,663, the LIA has recommended an average CI coverage of $316,000 (a coverage of about 3.9 years based on the average annual pay). However, it is important to note that the suitable ECI/CI coverage should be calculated based on your income and expenses amongst other factors (which definitely differs from person to person).

If you have not gotten your ECI/CI coverage, I urge you to speak to your financial consultant soon. These policies are based on your age and medical status so the sooner you get your coverage, the cheaper it is. Set aside a small budget a month for your policies so that you are not crippled by finances when things get critical.

 

Disclaimer: The opinions expressed in this article are solely my own. If you require more information, please feel free to PM me or speak to your trusted financial consultant.

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