Balance different types of cover

If you suffer a serious heart attack, you can claim a lump sum from your critical illness policy. The money - the amount depends on how much you were insured for - can come in handy for purposes such as taking no-pay leave from work. So says Mr Leong Sze Hian, the vice-president of the Society of Financial Service Professionals.

If you did not have a critical illness policy but had a hospitalisation and surgical (H&S) policy instead, you would be able to claim the hospitalisation expenses only, which are likely to be small, he adds. Statistics show that the hospital bill for 90 per cent of heart-attack patients is less than $1,500 for a stay of between five and six days in B2 wards at restructured hospitals.

Mr W.K. Choo, 54, a retired senior management executive, wishes he had had a critical illness policy when he was struck by nose cancer in 2002. He was advised to go for a certain type of scan which was unavailable in Singapore then. He flew to Hong Kong for the procedure, which cost between $2,400 and $4,000, depending on the hospital he went to. Inclusive of travel expenses, each trip cost between $5,000 and $7,000. He made four trips within a year.

'I doubt any private H&S policies at that time would have covered the cost of the scans, not to mention the incidental expenses,' he says. 'If I had had a critical illness policy, the payout would have taken care of my expenses in Hong Kong.'

He is convinced that people should have both critical illness and H&S policies if they want to deal with the risks of minor and major illnesses. It is the major illnesses that one should be particularly wary of.

'Health statistics show that one in four of us will die from cancer alone. Hell, the odds are formidable!' Mr Choo says. He regrets that following his cancer episode, no insurer is willing to sell him a critical illness or H&S policy.

Mr Leong of the Society of Financial Service Professionals advocates the following approach to prioritise your purchase of medical insurance:

• First, use the Medisave savings in your CPF account to buy a policy that covers hospitalisation and surgery mainly for major illnesses. It provides cover of up to $5 million in your lifetime, compared with the $750,000 limit of an H&S policy paid for by cash. Buy this even if you work in a company that provides you with H&S cover. Chances are you will not work there until you retire and then when you want an H&S policy of your own, you could be rejected by insurers as your health may have become non-insurable.
• Next, buy a 'reimbursement policy' whose premiums are payable in cash to cover most of the expenses not covered by the CPF-paid policy. The latter does not cover the pre- and post-hospitalisation expenses incurred as a result of your illness. On top of that, the CPF-paid policy comes with a 'deductible' - that is, you have to pay a certain amount of the expenses out of your own pocket.
• Then, buy an H&S policy whose premiums are payable in cash. This will cover expenses incurred during day surgery, which are not covered by either the CPF policy or the reimbursement policy. Such a policy could cost four times as much as the CPF-paid policy.
• Finally, buy a critical illness policy to cover other expenses arising from a critical illness.

Says Mr Leong: 'If you have a limited budget, don't give up a critical illness policy for a H&S policy whose premiums are payable in cash. 'The key is balance - have a bit of each different type of cover, instead of betting your entire budget on one. Health care is not a casino.'