TYPES OF LIFE INSURANCE PRODUCTS
Life insurance gives you and your family financial protection against the financial loss that can happen after your death or if you suffer a total and permanent disability
It can also give you a retirement income or act as a financial back-up in emergencies and protect you against health-care costs.
Whole Life Insurance
With whole life insurance, you get life-long protection. You pay premiums throughout your life, but this can be changed to a limited period. The policy will pay out the sum insured and any bonuses you have built up when you die or become totally and permanently disabled (if this benefit is provided).
This plan is suitable for long-term savings if you would like the insurance company to invest on your behalf.
With term insurance, you get protection for a set period. It pays the sum insured only if you die or become totally and permanently disabled (if this benefit is provided) during this period.
Critical Illness will pay out a lump sum when you die or are diagnosed with a major illness. The illness that are covered vary, but usually include heart attack, stroke, coronary artery bypass, most cancers, kidney failure, fulminant hepatitis, major organ (heart, lung and kidney) transplants, paralysis and multiple sclerosis.
Basic medical expense insurance, also known as hospital and surgical insurance or hospital income plan, provides benefits for certain medical costs that result from accidents and sicknesses.
Hospital and surgical insurance will refund the in-patient expenses you have to pay while in hospital as well as certain out-patient expenses, depending on the limits shown in the policy.
A hospital income plan will pay a fixed daily amount of benefit based on the number of days you are an in-patient. This will depend on the limits shown in the policy.
Major medical insurance covers the expenses arising from a period longer than the limits in basic hospital and surgical insurance.
This is an income-protection product as it helps to replace part of your income if you become totally or partially disabled and cannot work as a result of an accident or sickness, under certain conditions.
Long-Term care is designed to meet some or all of the costs of daily living of a person who, as a result of accident or sickness, is physically disabled to the extent that he cannot live alone. He has to depend on others to help him carry out the most basic activities of daily living such as feeding, bathing, moving around in the home and so on.
A Life annuity provides a regular income to you. Usually you pay a lump sum which is invested by the insurance company in return for monthly payouts.
There are also annuities designed specially for members of the central Provident Fund (CPF), under the CPF minimum sum scheme or minimum sum plus scheme. For this annuity, you can invest the minimum sum with an approved life insurance company to provide a monthly income for the rest of your life.
Your premiums buy life insurance protection and investment units in a managed fund.
An ILP is a life insurance policy which provides a combination of protection and investment. Your premiums buy life insurance protection and investment units in professionally managed investment-linked funds.
ILP do not provide guaranteed cash values. The value of the ILP depends on the price of the underlying units, which in turn depends on how the investments in the fund perform. You pay the fees, expenses and insurance charges for an ILP through a deduction of the premium and/or sale of purchased units.
There are two categories of ILPs:
- Single premium ILPs where premium is payable in one lump sum.
- Regular premium ILPs where on-going premiums are payable.
The price of your units depends on how the investments in the fund perform. What it pays depends on the price of the units at the time you cash it in or die. You may also get death benefit.
Universal Life Insurance
A form of ‘interest sensitive’ whole life insurance that offers within certain limits flexibility in the amount, method and timing of premium payments. It also pays a death benefit and builds up cash value which can be borrowed from or withdrawn.
These plans give you flexibility to assist you in meeting your financial goals. Within certain limits, you can choose the amount, method and timing of your premium payments. Hence, it is important to regularly review your policy’s performance to ensure it continues to support your financial goals.
INFORMATION ON SPECIFIC TYPES OF HEALTH INSURANCE PRODUCTS
The following section briefly explains what each type of health insurance product covers, and provides general information about the different products. As the terms and conditions may not be exactly the same for every health insurance product, you should check the details of your policy and speak to your financial planner or insurance intermediary if you are not sure.
What is Health Insurance?
Health insurance provides you and your family with financial benefits which will help you recover partly or fully the financial loss you may suffer as a result of an accident, illness or disability. It can provide an income while you are disabled or in hospital, or cover the cost of your medical treatment or nursing care.
What Type of Health Insurance Product Do I Need?
The type of health insurance product you would need depends on what you want protection against.
If you want to… You should consider…
- Have your medical expenses paid
- Receive a fixed amount of cash when you are in hospital
- Reduce your financial burden when you are diagnosed with a major illness (for example, cancer)
- Replace your income when you are unable to work
- Pay the cost of any care you need when You are too weak to look after yourself
- Medical expense insurance
- Hospital cash insurance
- Critical Illness insurance
- Disability income insurance
- Long-Term care insurance
You can refer to Your Guide to Health Insurance for more information.
How Much Health Insurance Should I Buy?
You should first consider the quality of healthcare and the level of income protection you would want if you became ill or disabled and then buy enough cover to meet those needs. However, you should also consider whether or not you would be able to pay the premiums over the long term. You may have to prioritize your needs and structure your health insurance according to your ability to pay the premiums.
Medical expense insurance (or hospital and surgical insurance)
Medical expense insurance pays medical expenses incurred as a result of an accident or illness. The policy will pay expenses for inpatient medical treatment or surgery, some outpatient charges for day surgery, and consultations with specialists before and after the hospital stay, and X-rays and laboratory tests. ‘Major’ medical expense insurance will pay expenses for longer hospital stays due to a major illness or for major surgery such as heart bypass surgery or organ transplant.
Medical expense insurance will not pay you more than the actual medical expenses incurred regardless of the number of policies you have. There are also limits to the amount you can claim under each medical expense policy. The policy may include limits for all claims as well as limits for each illness, disability, year or lifetime. You can combine the limits of two or more policies to get higher benefits. Policies may also have exclusions for treatment of certain illness, such as pre-existing conditions, or treatment that is not for medical reasons. A medical expense policy may have a waiting period during which expense will not be paid unless they relate to accidental injuries.
Some medical expense policies may also have ‘deductable’ and ‘co-insurance’ features. A deductable (A) is the fixed amount you have to pay before policy benefits are paid. The co-insurance (B) is the of the diagram shows what is payable by the medical expense policy. So, you will not receive the full medical expenses from this type of policy.
Hospital cash insurance (or hospital income insurance)
Hospital cash insurance pays a fixed amount of benefit for each day you are in hospital for medical treatment or surgery, regardless of the actual expenses incurred for your hospital stay. This means that the total amount paid under the hospital cash insurance may be more or less than your actual expenses.
A hospital cash policy may have a waiting period, which means benefits are paid only after you have been in hospital for more than a set number of days. The benefits may also be paid for only a set number of days each year, or for the life of the policy. (In this case, the policy will end once the lifetime limit has been reached.) Waiting periods and benefit limits may vary across policies.
Critical illness insurance (or dread disease insurance)
Critical illness insurance pays a fixed amount each month to replace the income you would lose if you suffer a disability and you were not able to work as a result of an accident or illness.
Although the types of disease covered by critical illness policies may vary from one insurer to another, some major illness and types of surgery are covered by almost all policies. These include major cancers, heart attack; coronary artery bypass surgery exactly meets the definition in the policy. Definitions of diseases are fixed across all insurance companies in Singapore. You can refer to the websites of the Life Insurance Association (www.lia.org.sg) and of the General Insurance Association of Singapore (www.gia.org.sg) for the standardized definitions. A critical illness policy usually has a writing period for certain diseases or types of surgery. If any disease or type of surgery for which the policy specifies is diagnosed or carried out during the waiting period, no benefits would be paid.
Disability income insurance
Disability income insurance pays a fixed amount each month to replace the income you would lose if you were not able to work as a result of an accident or illness. These policies aim to ease your financial burden, and are not intended to completely replace the income you earned before the accident or illness. So, disability income insurance usually pays no more than 80% of your average monthly salary.
Disability income insurance may have a waiting period during which benefits will not be paid. Payment of benefits will usually start to be paid only if you are continuously disabled for longer than the waiting period. The monthly income benefit will usually be paid for up to five or 10 years, or until you are 60 or 65. Payment of benefits will stop once you can start working again, or it may be reduced in proportion to any recovery you make. (Any recovery is decided through medical check-ups carried out by the insurer.)
The most important thing to consider when taking up disability income insurance is the definition of disability used in the policy. Some policies define disability as not being able to do any work at all. As the probability of claiming under the second definition is lower than under the first, the premium will also be lower (as long as all other terms and conditions are the same). You should also bear in mind that there are other definitions of disability. Check with your financial planner or insurance intermediary on the definitions used in your policy.
Long-term care insurance
Long-term care insurance pays a fixed amount of benefit each month towards expenses for long-term nursing treatment. There is usually no age limit for this type of cover.
Benefits are paid when you cannot perform some ‘activities of daily living’. These include bathing, dressing, feeding, going to the toilet and moving around. The definitions of ‘activities of daily living’ and the minimum number of activities you must not be able to perform to qualify for the payment of benefits may vary from one policy to another. Payment of benefits will stop once the number of activities you cannot perform falls below the minimum stipulated in your policy
Some long-term care policies pay benefits for up to a set number of years. Once the benefits have been paid for that number of years, the policy will end. Other long-term care policies pay benefits for life as long as you meet the conditions for making a claim. There is also a waiting period, so benefit payments will begin only after you have not been able to perform the minimum number of activities for at least a set period of time.
Source: Your Guide to Health Insurance