If you have not heard, all insurers would have to adopt the new 2019 Critical Illness (CI) definitions set out by the Life Insurance Association Singapore (LIA) from 26 August 2020.
The new 2019 definitions are more specific and have added exclusions.
- For Major Cancers, it requires more evidence and it excludes more minor cancers.
- For Stroke, the header is changed from “Stroke” to “Stroke with Permanent Neurological Deficit”
There are a lot more changes. To learn more, click here for the summary we have done.
In short, the new 2019 definitions are stricter.
How do the changes affect you?
- If you are considering getting CI coverage, it is a good time to apply soon as some plans have started adopting the new definitions.
- If you have an individual life policy with CI coverage based on the current 2014 definitions or before, you will not be affected by the new changes.
- But what if you have CI coverage with the MINDEF-MHA Group Insurance? On 1 July 2020, Aviva had announced that CI coverage offered by the Living Care rider will follow the new 2019 definitions. And this change would affect BOTH existing and new policyholders.
This came as a surprise to some as they were not aware that for Group Insurance policies, the definitions, terms and conditions of the coverage can be changed by the Group. So, while Group Insurance coverage could be relatively cheaper at younger ages, it is important to understand the differences between an Individual Life Insurance Policy and a Group Insurance Policy.
I list out the key differences between them, the cells with a check mark indicates that it is more favourable.
We consider the example of a Male, Age 30, Non-Smoker:
- S$300,000 Critical Illness coverage
- Policy coverage till 65 years old
Annual premiums (8 July 2020):
|Age||Aviva MyProtector-Term Plan II (S$/year)||Aviva MINDEF & MHA Living Care (S$/year)|
- S$1million Death and Total Permanent Disability (TPD) Coverage
- Policy coverage till 70 years old
Annual premiums (8 July 2020):
|Age||Aviva MyProtector-Term Plan II (S$/year)||Aviva MINDEF & MHA Group Term Life (S$/year)|
|Individual Life Insurance (Eg. Aviva MyProtector–Term Plan II)||Group Term Life Insurance (Eg. MINDEF & MHA Group Insurance)|
|Premiums & Coverage Terms||Guaranteed throughout the policy term. ✓||Coverage terms can be negotiated, changed or terminated anytime by the Group.|
|Total Permanent Disability (TPD) Claims Payout||Pays a lump sum. ✓||Total Permanent Disability (TPD) Claims Payout Pays a lump sum If the sum payable is above S$200,000, the Company will first pay a lump sum of S$200,000 and pay the balance in 3 equal annual instalments.|
|Termination of Coverage||- ✓||For females: In the event of a divorce with your spouse, you will no longer be eligible to be covered under this policy.|
|Total and Permanent Disability Benefit||More lenient definition. ✓||Stricter. Does not payout due to inability to perform Activities of Daily Living.|
|Group Risk Limitations||N.A ✓||In the event of claims as result of Acts of Terrorism, the insurer's maximum liability is subject to the sub-limit of 0.75% of the Aggregate Sum Insured per policy year.
In the event of War, the insurer's maximum liability is subject to the sub-limit 0.75% of the Aggregate Sum Insured per policy year.
|Protection coverage upon key life events||Option to increase the protection coverage (by up to 50% or S$500,000) without evidence of health. ✓||N.A|
|Advance Payment Benefit (Event of terminal illness)||100% Sum Insured (No limit to amount). ✓||100% Sum Insured (up to S$400,000).|
|Daily Hospital Cash Benefit||Nil||$30 per day payable from 11th to 30th day of hospital stay. ✓|
How do you decide between an Individual or a Group policy?
An insurance purchase is a long-term commitment which could stretch for decades. And because group insurance is subject to changes in its coverage, premiums and claims criteria, the risk of insuring with Group Insurance is that you could face with higher premiums, reduced coverage and stricter claims definitions in future.
As a guide, your Group Insurance coverage should not comprise more than 50% of your total life insurance coverage. An individual life policy is essential for you to secure your coverage terms and premiums so that you and your family will always be protected while a group life insurance is useful to enhance your coverage at affordable premiums.
Life coverage: If you need to be insured beyond age 65, you should insure yourself fully with an individual life policy because the premiums of the group insurance increases exponentially after 65 years old.
Critical illness coverage: You should get an individual life policy to form the main part of your coverage needs as the premiums of the group insurance increases by 4X at age 40s and 10X at age 60s. If you are younger, and if is within your budget, you could get some group CI coverage as an add-on as the premiums in the younger ages are relatively cheaper.
Author: Shawn Lee, CFP®, Client Adviser