Understanding the difference between Terminal Illness and Critical Illness for Insurance

In one of my previous articles, I touched on how to apply for exemption from CPF’s Home Protection Scheme (HPS). A reader wrote in and posted an interesting question on what I usually look out for when buying mortgage insurance. Today, I shall touch on the difference between terminal illness and critical illness. But before you proceed, it is important that you make the effort to understand my article before jumping to conclusion. Not understanding the thin fine line between terminal illness and critical illness could be financially fatal. And I do mean it.

Most people who do not work in the insurance industry are confused between terminal illness and critical illness. To be honest, I used to be one of those. But my understanding starts to improve a little bit over the years as I talk to many financial planners and they shared with me some useful tips. Of course, I don’t work in the insurance sector and is not a certified financial planner. So, what I am going to share here is based on the best of my knowledge and readers should not misconstrue it as a form of financial advice. If in doubt, always check with your financial advisor.

Fundamentally, a terminal illness means that a person suffers from an illness that is likely to cause death in the near future. Most insurance policies include this as part of the coverage. In fact, the CPF’s HPS include death, terminal illness and permanent disability as coverage for members insured under the policy.

Critical illness

On the other hand, critical illness refers to illness such as cancer, heart attack or stroke. Although such these illnesses are considered critical, they may not cause death. Although critical illness sufferers are not faced with life-threatening situations, they may not be able to carry on working. For most insurance policies, you need to buy riders to cover this critical illness portion. Thus, for those who purchased insurance policies that covers merely terminal illness, you are exposed to the risk of loss of income inflicted by a critical illness.

If you look carefully at the CPF’s HPS, the coverage does not include critical illness. Indeed, the premium can be deducted from your CPF Ordinary Account (OA). So, you don’t feel the pinch of paying for HPS. But what is the point of buying something that may not serve its intent? With cancer, heart diseases and stroke so prevalent in Singapore, it is naïve to think that HPS is [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

Read my other articles on CPF:

  1. Exemption from Home Protection Scheme (HPS)
  2. CPF’s Home Protection Scheme (HPS)
  3. The Dark Side of CPF Housing Withdrawal Limit

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2 thoughts on “Understanding the difference between Terminal Illness and Critical Illness for Insurance

  • August 30, 2017 at 3:18 am

    Terminal illness is generally accepted as likelihood of dying within 12 months, as certified by the insurers’ panel of specialists (and most other specialists too).

    Hence “critical illness” events such as moderate stroke, myocardial infarct, inability of 3 out of 6 ADLs, blindness, kidney failure, TPD, etc which may not be certified as “terminal”, but will certainly impact your earning capability i.e. job.

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