Critical illness plans are plans that pay a lump sum of money whenever you’re critically ill. The payout is supposed to help you cope during the recovery period that you cannot work. Apart from the basic and early critical illness plans, insurance companies recently introduced multi-pay critical illness plans. What are they, and how are they different? In this article, fundMyLife examines the differences between single-pay and multi-pay critical illness plans.
#1 Number of times you get payouts
Let’s get the most obvious difference out of the way – the number of times you get payouts.
Typically, the usual critical illness plans provide a single payout when you contract one of the 37 diseases, in a relatively late stage. For example, you’re only eligible for the payout when you contract stage III or stage IV lung cancer. It also means that if you’re diagnosed at stage I, you do not get any payouts.
To cover that gap, early critical illness plans provide the payout if the doctor diagnoses you with diseases in the earlier stages. For example, a stage I and stage II cancer qualifies you for a payout. If you wanted protection for all stages, you would have to purchase both plans. The disadvantage is that once you get your payout, the plan terminates and that’s the end. On top of that, it will be very hard to purchase (almost impossible) a new critical illness plan since you have pre-existing conditions. This is disadvantageous because some diseases do reoccur during the course of one’s life, e.g., cancer.
In response to the demand for total coverage for critical illnesses and the possibility of recurring critical illnesses in a different stage, insurance companies are providing a multi-pay plan, a plan that covers the functions of both regular and early critical illness plans. Under multi-pay plans, in general you can get payouts when you contract critical illnesses, without a plan termination.
#2 Terms and conditions
On the surface, it seems simple. For single-pay critical illness plan, you get paid once in a lump sum, and that’s it. For multi-pay critical illness plan however, you get paid several times over the course of your life. The former is simple, as it involves only getting sick with one of the 37 critical illnesses once. However, for you to enjoy the multiple payments under the multi-pay plan, you’d have to go through the terms and conditions closer.
In general, the critical illnesses are lumped into categories, called layers. For example, the table below shows the layers defined by Aviva My Multipay Critical Illness Plan.
For Aviva, within Layer 1, there are three groups of diseases. For that, there’s no waiting period for claims between early critical illnesse in different groups of diseases. However, it might not be the case for multi-pay critical illness plans from other companies. Disclaimer: we’re using Aviva as an example for illustration purposes, not because we think it’s better or anything (that’s a story for another time).
To reemphasize, when you choose to take these multi-pay critical illness plans up, you MUST look up the terms and conditions to know what you can and cannot claim for after you contract a critical illness. Make sure you and your financial adviser are 100% sure of the terms and conditions for the plan to work in your favor.
You do not want to be in a situation where you have multiple critical illnesses but are unable to claim for some of them because you did not take the fine print into account.
According to our research, multi-pay critical illness plans are slightly more expensive than combining both standalone critical illness and early critical illness plans. The main reason, we speculate, is due to the fact that multi-pay critical illness plans have multiple payouts.
For the more price-conscious folks out there, there are alternatives to consider. Instead of forking out more on standalone critical illness plans, be it single-pay or multi-pay, you can consider taking on critical illness riders on your existing plans as well.
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No matter the differences between these two types of critical illness plan, it’s definitely a good idea to have critical illness protection. With increasing lifespan over the years, it is all the more important we have things to fall back on in the case of critical illnesses. Best speak to your financial adviser about it.
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