Most working professionals in Singapore have health insurance, such as an Integrated Shield Plan, to cover hospitalisation bills. But many overlook the financial impact of a long-term illness. If a major illness forces you to stop working for several years, health insurance will not replace your lost income. This is where critical illness insurance plays a role.
The LIA Protection Gap Study
The Life Insurance Association (LIA) Singapore Protection Gap Study highlighted a significant critical illness protection gap. Economically active Singaporeans and Permanent Residents face a 74% gap in their critical illness coverage.
This means the average professional has far less protection than required to sustain their family during a recovery period. This leaves household finances vulnerable if the primary breadwinner suffers a health setback.
The LIA Recommended Critical Illness Coverage
LIA recommends critical illness coverage equivalent to approximately 4 times your annual income.
This recommended amount is based on a typical 5-year recovery period. It aims to cover your household expenses, debt commitments, and financial obligations while you focus on regaining health, without depleting your retirement savings or forcing you to liquidate investment assets.
Why Standard Health Insurance Is Not Enough
Integrated Shield Plans cover hospital stays, surgery fees, and ward costs. They pay the medical provider directly. They do not cover non-medical costs.
Critical illness insurance provides a lump-sum cash payout directly to you upon diagnosis. You are free to use this payout for any purpose: covering daily living expenses, paying children's school fees, servicing mortgage payments, or funding alternative treatment options not covered by standard insurance policies.
The S.H.I.F.T. Method Approach to Protection
Income protection is a key element of the Insure (I) phase of my wealth system. Before reviewing policies, get a Snapshot of your finances. We calculate your actual critical illness gap by looking at your current coverage, outstanding liabilities, and annual commitments. The goal is to close the gap efficiently, ensuring one health event does not wipe out your wealth Flow.
How to Calculate Your Critical Illness Gap
Begin with your annual income and multiply by 4. Deduct any existing critical illness policies you hold. The remaining sum represents your protection gap. Reviewing this number allows you to adjust your coverage before a health incident occurs.
If you want to calculate your critical illness protection gap and structure your coverage, I am happy to sit down for a 20-minute conversation. No pitch, no pressure.
Want to close your critical illness protection gap?
20 minutes. No pitch. We will calculate your specific protection gap based on your income and liabilities, and outline a plan to secure your income.
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