I recently spent some time researching critical illness insurance, and I’d like to share my findings with you here.
First, let’s talk about insurance in general. The primary purpose of insurance is to protect against potential unforeseen financial losses in the future. From an economic perspective, insurance is a service that ensures certainty of future income. For those who are risk-averse, they are often willing to pay a certain amount of money to purchase this sense of security.
There are many types of insurance. We won’t discuss property insurance, auto insurance, or even investment-linked insurance here; instead, we will focus only on a few basic protection plans:
- Life Insurance: Pays out upon death and covers nothing else; typically provides coverage up to a certain age;
- Accident Insurance: Covers accidental injuries only and is affordable. It is important to choose a plan that includes accidental medical coverage, but the limit doesn’t need to be too high—basically enough to cover the deductible of your medical insurance is sufficient;
- Medical Insurance: Covers medical expenses incurred during serious illnesses. Premiums increase with age. Pay close attention to renewal terms; although guaranteed renewal is rare for medical insurance, the more lenient the renewal conditions, the better. For example, policies that explicitly state renewal will not result in premium increases or denial due to health changes or prior claims are far superior to those requiring underwriting review at each renewal;
- Critical Illness Insurance: Primarily compensates for loss of income in the event of a critical illness.
This time, we will focus on critical illness insurance. Among these types of insurance, critical illness insurance is the most expensive, but it can provide lifelong coverage. Many people do not consider critical illness insurance when they are young, but once health issues arise, they may find themselves unable to renew their medical insurance or purchase critical illness insurance.
The variety of critical illness products is overwhelming. Many people find that the more they learn, the more confused they become, as different products vary significantly in almost every aspect and cannot be compared based on pricing alone. Therefore, below is a detailed breakdown of the key metrics of critical illness insurance to help you make a choice based on your actual situation.
Underwriting Rules
Entry Age: 0–60 years old. The wider the eligible age range, the better, though naturally, it is fine as long as you currently fall within the range.
Coverage Period: Lifetime > Up to age 85 > Up to age 80 > Up to age 70. The older you get, the higher the probability of developing a critical illness. Moreover, with life expectancy increasing, we might easily live past 100 in the future, so lifetime coverage is recommended.
Maximum Premium Payment Term: The longer, the better. Although a longer term means higher total premiums paid, due to the waiver of premium for mild illnesses, a longer payment term actually increases the likelihood of waiving more premiums.
Underwriting: Manual Underwriting > Smart Underwriting > Health Declaration Only: If you have minor health issues that do not meet the health declaration requirements, you cannot purchase policies that rely solely on a health declaration. However, with smart or manual underwriting, you may still be able to purchase the policy at the standard rate or with a loading. Additionally, without manual underwriting, many people face the risk of having claims denied due to non-disclosure in the health declaration, which would mean wasting their premiums. Relatively speaking, manual underwriting is much safer. Also, never lie during this step; insurance companies can access almost all medical and physical examination records.
Waiting Period: 90 days > 180 days. The shorter, the better.
Coverage
Severe Illnesses: There are 25 severe illnesses included in all critical illness policies, with identical definitions. These 25 conditions were jointly established by the Insurance Industry Association and the Medical Doctor Association. Six are mandatory as required by the regulatory authority, and 19 are recommended. These 25 conditions essentially cover over 95% of current critical illness claims. In fact, all current critical illness products include these 25 severe illnesses and add additional less common ones, expanding the list to 50, 80, 100, or even more. Therefore, there are fewer pitfalls in this area.
Moderate and Mild Illnesses: In reality, especially given the trend toward minimally invasive treatments and routine physical check-ups, mild illnesses are particularly relevant. Therefore, it is essential to consider insurance products that include mild illness coverage and a waiver of premium for mild illnesses. One thing to note is that 9 specific mild illnesses have a relatively high incidence rate. When selecting insurance, try to verify whether they are covered. It is even better if some policies classify several of these as moderate illnesses, as moderate illnesses offer higher payouts and usually have separate claim counts from mild illnesses:
- Very early stage malignant tumor or malignant lesion (Carcinoma in situ);
- Atypical acute myocardial infarction;
- Minor stroke;
- Coronary artery intervention surgery (non-open chest surgery);
- Heart valve intervention surgery (non-open chest surgery);
- Aortic surgery (non-open chest surgery);
- Severe vision impairment;
- Third-degree burns of specific area (covering 10%-20% of body surface area);
- Pituitary tumor, brain cyst, cerebral aneurysm, and cerebrovascular aneurysm;
Payout Ratio: The higher, the better. Mild illnesses generally pay out around 15%-30%, while moderate illnesses typically pay out around 50%.
Number of Payouts: The more, the better.
Grouping of Severe Illnesses: Ungrouped > Grouped, but cancer is in a separate group > Grouped. Grouping means that only one claim is paid per group of critical illnesses. Therefore, the more groups, the better. It is also important to check whether the 6 common critical illnesses are placed in different groups:
- Malignant tumor — excluding certain early-stage malignant tumors;
- Acute myocardial infarction
- Sequelae of stroke — permanent functional impairment;
- Major organ transplant or hematopoietic stem cell transplant — must be allogeneic transplant
- Coronary artery bypass grafting (or coronary artery bypass surgery) — requires open-chest surgery
- End-stage renal disease (or chronic renal failure uremia stage) — requires dialysis treatment or kidney transplant surgery.
Waiting Period Between Two Claims: The shorter, the better.
Others
Death Benefit: Sum Insured > Premiums Paid > Cash Value > None. Of course, you should also review the cash value tables of different products here; for some products, the cash value at certain ages may exceed the premiums paid or even the sum insured.
Insured Waiver: Once a claim is made, there is no need to continue paying premiums. Nowadays, waivers are typically triggered by minor illnesses, which highlights the advantage of a longer premium payment period.
Policyholder Waiver: If the policyholder suffers from a critical or minor illness, they no longer need to continue paying premiums. Some products offer this as an optional rider while others do not. It is primarily used when insuring family members, especially when the policyholder is the main breadwinner, ensuring that coverage for other family members remains uninterrupted.
Purchase Channel: Having an agent generally provides far better service than insurance products sold exclusively online. However, remember not to trust any verbal promises made by agents; only the policy terms matter. Products sold online carry no inherent risk.
Precautions
Insurance companies are commercial entities, not charities. Therefore, high-risk conditions or those certain to occur are usually excluded from coverage, or the premiums will be very high. Thus, it is essential to purchase insurance early, and before buying, it is better to have fewer items checked during a medical examination.
When choosing insurance, focus on the product itself. Promotional materials and personal recommendations are irrelevant; only what is explicitly stated in the policy terms matters. Insurance products are backed by regulatory authorities, so there is less need to worry about the size of the insurance company. Of course, higher brand recognition and better service inevitably lead to higher prices. These are all costs ultimately borne by consumers, but they have no practical impact on purchasing or claims settlement—only the policy terms are important.
Some Suggestions
Currently, thyroid cancer, which has a high incidence rate, is classified as a critical illness in Mainland China. Given its high cure rate and relatively low treatment costs, purchasing critical illness insurance essentially guarantees a payout. However, two points require attention: First, if you purchase a single-pay critical illness policy, once a claim is made for thyroid cancer, the contract terminates. You will receive no coverage for any subsequent minor illnesses, and having had cancer, you will be unable to purchase any new insurance. Second, if you purchase a multi-pay policy with grouped coverage—or where cancer is in a separate group—the probability of being diagnosed with another type of cancer after thyroid cancer is relatively high, yet you would still lack coverage. Therefore, it is advisable to consider purchasing a single-pay critical illness policy combined with a multi-pay cancer-specific policy, which may be cheaper than a multi-pay critical illness policy.
Since many critical illnesses do not pay out immediately upon diagnosis—in fact, only cancer, loss of limbs, and severe burns qualify for immediate payout—and many require specific treatments or meeting specified criteria after 180 days, some individuals may not survive the 180-day waiting period following a critical illness diagnosis. Consequently, if you have a pure term critical illness policy (i.e., one with no death benefit or return of premium), you would not receive a critical illness payout under such circumstances. Therefore, if death benefits are important to you, consider adding a term life insurance rider to your term critical illness policy.
Additionally, it is best to secure the highest possible initial sum insured. Considering future health and age factors, you may not be able to successfully increase your coverage later when desired. Coupled with inflation, it is recommended to opt for the highest feasible initial sum insured.
Overall, the better the coverage conditions, the higher the price. When comparing two products, determine whether you value specific services enough to justify the price difference. To calculate the cost of critical illness insurance, compute the total premiums paid (annual premium × number of payment years) before making comparisons. Only when all policy terms of two products are identical can you judge value solely based on premiums. Of course, insurers are aware of this, so they rarely launch new products that are completely identical to existing ones on the market~~~
Furthermore, if circumstances permit, Hong Kong critical illness insurance is also worth considering. Here is a comparative article analyzing critical illness definitions for reference:Comprehensive Analysis: Comparison of Definitions for 25 Common Critical Illnesses Between Hong Kong and Mainland China. However, please note that insurance claim payouts from Hong Kong may not always be successfully remitted to Mainland China, and you might need to travel to Hong Kong personally to handle related matters.
In summary, selecting critical illness insurance is a complex and lengthy process. Take your time, compare products from various insurers, and choose a suitable, cost-effective option based on your actual needs. Remember to purchase before your birthday, otherwise, you’ll end up spending much more~~
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