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What is critical illness insurance? How will it work for me?

    In this article, we’ll explain how critical illness insurance can work for you and the ones you love, so you don’t have to worry about the future anymore!

    The Department of Statistics Malaysia outlined ischaemic heart diseases (15%), pneumonia (12.2%) and cerebrovascular diseases (8.0%) as the top 3 principal causes of death in Malaysia.

    Critical illness in numbers according to the Department of Statistics Malaysia (DOSM)

    Though there is an 0.6% in the number of percentages, this percentage is meant to show just how devastating a critical illness can be if you are not adequately prepared for it.

    Covering all you need to know about coverage, benefits, and everything critical illness insurance-related, read on to help you understand why you need critical illness insurance.

    List of critical illnesses

    A critical illness insurance works upon diagnosis of a serious disease.

    Before understanding more about critical illness insurance, let’s identify what critical illness means and how having one can impact you. A critical illness is identified as a medical condition that is life-threatening to an individual.

    This is a list of critical illnesses that is compulsory to be covered across the insurance industry set by Bank Negara Malaysia (33 types of critical illnesses and three corrective surgeries):

    Heart attackCoronary Artery By-Pass Surgery
    Serious coronary artery diseaseAngioplasty and other invasive treatments for coronary artery disease
    Heart valve surgery Fulminant viral hepatitis
    End-stage liver failurePrimary pulmonary arterial hypertension
    End-stage lung diseaseKidney failure
    Chronic aplastic anemiaMajor organ/bone marrow transplant
    Blindness – permanent and irreversibleLoss of speech
    ComaThird-degree burns
    Multiple sclerosisParalysis of limbs
    Muscular dystrophyAlzheimer’s disease/severe dementia
    Motor neuron diseaseParkinson’s disease
    Terminal illnessEncephalitis
    Benign brain tumourMajor head trauma
    Bacterial meningitisMedullary cystic disease
    Brain surgeryLoss of independent existence
    HIV infection due to blood transfusionCardiomyopathy

    Despite Bank Negara Malaysia (BNM) outlining a total of 36 illnesses, some insurance companies tend to offer more coverage, from a minimum coverage of one illness, up to 160 illnesses.

    How much does a critical illness cost?

    When hit with a critical illness, you have the option of getting treatment at government hospitals or private healthcare.

    To some, getting the most affordable treatment for a critical illness is what they look for. This is why most people will opt for cheaper medical treatments in government hospitals. However, if your illness requires surgery or immediate attention, government hospitals might not give that to you because they have a long waiting list.

    In cases like this, government hospitals will, usually, refer the patient to a private hospital IF they can afford it.

    Here are some critical illness treatment costs that you SHOULD look into, to have a better grasp of what you may be paying for.

    • Angiogram/one stent angioplasty – Government hospitals will charge you from RM50 – RM200, while private hospitals charge RM15,000 – RM45,000
    • Knee replacement – Government hospitals will charge you from RM10,000 – RM35,000, while private hospitals charge RM25,000 – RM45,000
    • Coronary bypass – Government hospitals will charge you from RM4,000, while private hospitals charge RM25,000 – RM80,000
    • Chemotherapy will set you back RM200 per treatment in government hospitals and RM50 – RM4,000 per cycle in private hospitals.
    • A hip replacement can cost you RM8,000 – RM15,000 in a government hospital, while private ones can charge from RM24,000 to RM55,000.
    • Stroke treatment can cost you RM4,000++ in a government hospital, while private hospitals may charge you RM35,000 to RM75,000.

    Treatment for critical illnesses is not cheap, no matter which choice you make. To make things worse, 75% of us Malaysians cannot afford to pay these hefty medical bills out of our own pockets because we can’t even save RM1,000 from our salaries for emergencies like this. This highlights the need to do financial planning for a critical illness.

    In cases where you have critical illness insurance, it will be able to help you with your day-to-day expenses, keep a roof over your head, and car loan if you have any for you to still live comfortably even without a source of income while you recover.

    Is critical illness insurance important?

    Critical illness can happen to anyone. Depending on the diagnosis and treatment you receive, you could be looking at 6 to 12 months in recovery time. In your journey to recover, medical costs and expenses will accumulate and pose a threat to your finances.

    A critical illness requires intensive medical care and treatment that can quickly exhaust your medical insurance policy. AKPK Debt Management Programme reports that 14.3% of its program participants cannot pay their debts because of high medical costs.

    Even if your costs are well within your medical insurance coverage, your medical insurance does not cover your loss of income during your recovery. With critical illness insurance, the lump sum payment can replace your income and keep you afloat.

    What is critical illness insurance? How does critical illness insurance work?

    A critical illness insurance is the additional coverage you need to help you from diagnosis to recovery.

    Different from life and medical insurance, critical illness insurance will pay out a lump sum upon diagnosis and it is up to the insured to decide on how they will spend the money. The payout comes in handy to cover non-medical bills, travel expenses, and maybe car/house loans. The payout enables you to focus on spending time with your loved ones while you recover.

    What does critical illness insurance cover?

    Currently, all critical illness insurance cover end-stage level of illnesses based on the 36 critical illnesses we have mentioned earlier. Some provide basic coverage of five and up to a certain maximum number of critical illnesses, which you can customize based on your risk.

    Some insurance providers offer add-on coverage options such as personal accidents, maternity, cosmetic surgery, and more, so if you are looking into getting insured for these, do inquire within.

    What are the benefits of critical illness insurance?

    How much you get depends on a few factors. The benefits you will receive are based on what your insurer can provide you as part of their unique insurance coverage. Common benefits are:

    • The number of plans with increasing value of your sum assured
      Sum assured refers to the amount of coverage you are entitled to according to your critical insurance plan. If you want a higher amount of basic sum assured, you may be required to pay a higher insurance premium.
    • Percentage of payout per coverage
      Percentage of payout refers to the portion you will get from your critical illness insurance plan. It depends on your contract and illness, which will be initiated upon diagnosis.
      For example, a policyholder can select a sum insured of RM50,000 to RM250,000. Depending on the sum insured, if the policy holder is diagnosed with early stage critical illness, 50% of the sum insured is paid out.
      Advanced stage critical illness can get you 100% of the sum insured or the remaining 50% if there is a claim made previously.
    • Additional payout
      Additional payouts are offered on top of your basic sum assured if you are diagnosed with a specific critical illness. This is an offer that is outlined by your insurer.
    • Additional benefits
      This points to additional benefits you will receive from your insurer.

    What are the features of critical illness insurance?

    Every critical illness insurance plan has features you need to inspect before committing to a particular plan. Features may include:

    • Waiting period
      The waiting period after commencement of the policy is important, as your benefits will only come into effect after a certain period of time since diagnosis.
      Insurers commonly impose a 30-day waiting period for the 36 critical illnesses mentioned earlier and 90-days for special critical illnesses.
      It is important to note that there are insurers that offer zero waiting period after policy commencement.
    • Survival period
      A survival period may only pay your claim if you can survive 7, 14, or 30 days after diagnosis, depending on your plan.
    • Premium rate
      Your premium rate depends on your critical illness insurance plan. For a term plan, premium is guaranteed at policy entry age and will increase according to your relevant age.
      Insurers will revise your premium rate and must notify you within 90 days of revision.

    What are the different types of critical illness insurance?

    Doctors diagnosing a critical illness.

    A critical illness insurance plan is divided into two types – a term policy and an investment-linked policy.

    A term policy is a critical insurance plan that is claimable upon diagnosis of a critical illness. Its coverage term is shorter and will end when a claim is made.

    An investment-linked policy is a rider plan, an insurance policy provision that adds benefits to the terms of a basic insurance policy, that pays you a lump sum while your policy remains.

    The value of this policy will continue to grow as part of an investment and cover your insurance costs.

    How many times can you claim on critical illness insurance?

    There are a number of claim structures you can look at before committing to critical illness insurance. The claims process is straightforward, as mentioned here. Here are several conditions you’d want to pay attention to:

    • Single claim
      Most traditional critical illness insurance plan will have a single claim approach. In this type of insurance plan, you get to make a single critical illness claim upon diagnosis before your policy ends.
    • Multiple claims
      As the name suggests, you are able to make two to three claims per occurrence, but they cannot be of the same illness or severity.
    • Multiple claims, same illness
      Different from multiple claims, this type of plan covers a critical illness you are diagnosed with and you have a previous medical history of the illness.

    What are the exclusions of critical illness insurance?

    Exclusions are basically risks that are not covered and should be given attention to by would-be policyholders. You should never take exclusions for granted so that it does not affect your claims process in the future.

    Common exclusions of critical illness insurance include:

    • Pre-existing illnesses
    • Other illnesses that are not specified in the Critical Illness coverage list
    • Critical illness diagnosed within the first 30 days from the of your policy activation date for Critical Stage and/or 60 days from your policy activation date for Early Stage.
    • Critical illness that results in your death, 14 (some 15) days after diagnosis.
    • Any critical illness diagnosed due, directly or indirectly to a congenital defect or disease.
    • Diagnosis of Fulminant Viral Hepatitis, Cancer, Encephalitis, Bacterial Meningitis, Alzheimer’s Disease/Severe Dementia or Terminal Illness of the insured, where in the insurer’s opinion was directly or indirectly due to an Acquired Immune Deficiency Syndrome (AIDS) or infection by any HIV.
    • Any of the critical illness or covered surgeries caused by self-inflicted injury.

    How much does critical illness insurance cost?

    It is important to gauge what kind of plans you are looking at before considering how much you can pay for critical illness insurance. Insurance plans include:

    • Early stage plans
      This type of plan allows policy holders to claim payouts regardless of the stage of their critical illness.
    • Basic plans
      Basic plans typically provide coverage only during more severe stages of an illness
    • Single-pay plans
      As the name suggests, single-pay plans makes a lump sum payment upon diagnosis and policy ends.
    • Multi-pay plans
      A multiple pay plan provides multiple payouts upon diagnosis, and, is helpful for long-term illnesses that risk a relapse.

    What are the factors that affect your critical illness insurance premiums?

    Once you have understood the plan you are looking for, other considerations you should consider are:

    • Affordability
      While you should set aside some allocation for insurance, you should not forget about other financial obligations you may have
    • Coverage
      The general rule of thumb suggests that minimum coverage should be three years worth of your annual income.
    • Dependents
      Do you have aging parents, children, or a spouse that relies on you financially? If you are diagnosed with a critical illness and can no longer work, how will this affect them?
    • Family history
      Do you have a family history of a critical illness that can increase your risk of a diagnosis? If you do, consider a critical illness insurance to keep your mind at ease.

    Getting the right combination of insurance policies will ensure you are protected financially during difficult times and critical illness insurance is one of them. Doing your research and understanding how they work is the first step into protecting your future.

    Still unsure? Talk to our insurance advisors and get all the information you need before making a commitment. Remember, if this is not only for you, do it for the ones you love.

    Sources :

    Department of Statistics Malaysia