Five Essential Type of Insurance Protection
There are essentially five different types of insurance - Death or total permanent disability, critical illness protection, disability income protection, accident protection, and lastly medical. Although there might be a slight overlap in some of the coverage, you need a scope of different types of protection, to cover the different protection risks that you might face.
Photo credit: National Cancer institute
For this article, we will focus on two of the five pillars. They are critical illness protection and disability income protection.
Critical Illness Protection
If we were to elaborate a bit further on Critical illness protection, the particular coverage provides you with financial protection if you are diagnosed with a critical illness, for examples, such as cancer, stroke, heart disease, and kidney failure. What is useful about critical illness protection is that it usually provides a sum of money to ensure that you and your family’s financial need is still catered for even when you are undergoing treatment.
There is usually a waiting period for specific illnesses or types of surgery. If any illness is diagnosed or a type of surgery is carried out during the waiting period, no benefits will be paid.
Most traditional critical illness plans only cover the late stage of a critical illness and it is only in recent years do plans cover the early and intermediate stage as well. Hence it is always good to review your current critical illness plan to make sure if provides you with the type, and the amount of financial protection that you will need.
Some of you may think -do I still need a critical illness plan if I have a medical plan or group hospital & surgical plans?
A medical or hospital plans only help with the reimbursem*nt of the medical bill. Although it can help to cover the cost of medical treatment such as dialysis or chemotherapy, we have to remember it is usually on a reimbursem*nt basis.
There might be a co-payment and also a limit to how much you can claim. Also, you run the risk of not being covered permanently if you are no longer working in a particular company or have retired.
Concurrently, depending on how serious the condition is, we may take anything a long time to recover. And while recovering, our income might be affected. Therefore, a critical illness plan complements the medical plans to provide additional financial support.
Besides the initial cost of treatment, there are also other follow up or even cost that we do not realize. For example, we might want to change our diet to healthier and organic food, and we might have to engage a domestic helper to assist us in our day to day activities. Therefore, we have to bring into consideration all these potential expenses in planning for our critical illness protection
Unfortunately, some of us may have a pre-existing condition and we wonder if there is anything we can still be covered for.
Well, depending on the severity and type of existing condition, you still might be able to purchase critical illness protection. Insurance companies can charge you extra because of the additional health risk that you might have, they can also exclude you for certain critical illness while still insuring you for the others.
In recent times, insurance companies have been innovative to launch specific critical illness plans that cover for certain illnesses only such as cancer and you might find such plans more suitable for you.
photo credit: Kelly sikkema from Unsplash
Disability Income Protection
Disability income protection usually provides a monthly pay-out in the event that you are unable to work due to illness or injury. Such monthly payout can be for a certain number of years, or even for life. Some disability income policies may allow you to insure up to 75% of your income or at least, a monthly amount that you believe is enough to cater to your expenses
If you recovered from your illness or injury but have to switch to a lower-paying job, some disability income protection plans can also pay you a percentage of what you use to earn.
Pay-out will, of course, stop if you can resume work and still earn the same income as before
There is some confusion between disability income and Total permanent disability coverage.
Total permanent disability, or more commonly phrased as TPD, provides a lump sum only the condition of permanent disability is met. Although there are some overlaps with disability income, the key difference that the disability needs not be permanent for a disability income plan to take effect.
Also, the type of pay-out differs as disability income usually pays a monthly benefit and this might be more useful in certain circ*mstances.
Conclusion
I believe that there can be a cost efficient way to plan for your insurance coverage. To make effective use of your monies to plan for the whole scope of the five different pillars. Approach your adviser today - ask how can I have all five scopes planned effectively, I am sure he or she will be give your some insights on it!
My opinions are personal and not attribute to Great Eastern
