According to a study done by The Life Insurance Association (LIA), Singaporeans do not have enough insurance coverage for critical illness and financial needs during and after the recovery stage.
The study shows that critical illness coverage that most people have is just enough to cover 20% of their needs if they encounter such illnesses. This means that some do not have early and/or intermediate critical illness coverage whereas some have zero critical illness coverage. In some cases, due to insufficient insurance coverage, people are found to be struggling with financial burdens for themselves or family during and after the recovery stage.
Average coverage amount is insufficient for loss of income and other miscellaneous costs due to critical illness
Although Singaporeans are covered by MediShield Life and Integrated Shield Plans for hospitalisation, they neglect the financial needs for the loss of income when they are diagnosed with a critical illness. Such financial needs may include children’s education fees, loans and other commitments. People need coverage for these financial needs until they are recover to return to work. It is important to get yourself insured for at least five years as it is an assumed recovery period for critical illnesses.
According to LIA, the critical illness coverage of an average working adult in Singapore is just $60,000, well below the LIA recommendation of $316,000 which is about 3.9 times the average annual pay of $81,663. $60,000 could only cover 1 year or less for yourself and treatments in the event of a critical illness diagnosis. In addition to this, there are other medical related costs and personal expenses, it is no surprising that many Singaporeans are worried about the financial burdens on their family if they were to be diagnosed with a critical illness.
The study done by LIA used a measure called ‘protection gap’ to examine the extent of insurance coverage. There are 2 components in this gap namely, death (mortality) and critical illness protection.
The mortality protection gap represents the financial gap that covers family and/or dependants’ financial needs such as loans, education fees and other family expenses over a number of years in the event of death. The estimated average protection needs in the event of death of a working adult with one dependant is about $739,000 which is approximately 9 times the person’s annual income.
The biggest mortality gap is among young Singaporean working adults between the age of 20 and 34 according to LIA. This can partially be attributed to them having just entered the workforce and hence, they have less disposable income and death insurance coverage not being their priority.