How much critical illness insurance/takaful coverage do you need in Malaysia?
Depending on who you ask, RM200,000 coverage could be too little for one individual, too much for another, or just right for someone else. So how would you know if your current critical illness coverage is sufficient?
We may not be able to provide a conclusive answer, but let’s discuss some factors that may help you make informed decisions and determine whether your critical illness coverage is sufficient for you.
How long does it take to recover from critical illness?
One important consideration as to how much critical illness coverage you need will depend on how long it takes for one to recover from a critical illness. Below are the estimated recovery times for the top 3 critical illnesses in Malaysia, which are heart attack, cancer, and stroke:
Heart Attack
The recovery for heart attack can range from several weeks to several months. However, recovery depends on many factors, like the severity of your condition, how quickly you receive treatment, how well you adhere to your treatment plan, and other risk factors.
Cancer
Research has shown that the 5-year survival rate of cancer is at 66%, during which patients have to undergo chemotherapy, which usually takes between 3 to 6 months, and go through PET scans and be on medication. A study has found that common problems arising for cancer survivors post treatment are fatigue or a lack of stamina, sexual dysfunction, and musculoskeletal issues.
Stroke
The time taken to recover from stroke, may take weeks, months, or even years. While some people fully recover, others suffer long-term or permanent disabilities.
There are long-term effects of critical illnesses to consider
After the diagnosis of a critical illness, some survivors may be able to return to their normal functioning life. However, there could be physical and psychological long-term and late effects of critical illness. Many will likely need to make a number of lifestyle changes, be on long-term medication, and go for rehabilitation, which will impact the quality of life of many survivors.
How much critical illness coverage do you need?
The general guideline is that you should get critical illness protection of 3 to 5 times your annual income to get adequate coverage. This is based on the number of years it takes to recover and also the financial needs to support post-diagnosis lifestyle changes while you take a break from work.
To help you understand, here’s a quick example of calculations on how much critical illness protection is needed based on 3x and 5x your annual salary:
Annual Income | Critical Illness Protection Needs (Approximately 3x annual income) | Critical Illness Protection Needs (Approximately 5x annual income) |
Annual Income | Critical Illness Protection Needs (Approximately 3x annual income) | Critical Illness Protection Needs (Approximately 5x annual income) |
RM50,000 | RM150,000 | RM200,000 |
RM65,000 | RM195,000 | RM260,000 |
RM80,000 | RM240,000 | RM320,000 |
RM100,000 | RM300,000 | RM500,000 |
Your individual coverage needs will be different and specific to you. Alternatively, consider reviewing your financial needs over a five-year recovery period to determine your exact financial situation, or seek professional advice where necessary. When you are undergoing treatment, the last thing that you want to do is worry about your financial commitments.
What is your critical illness protection gap, and how can you bridge it?
Understanding your protection gap is one way to determine whether you have enough financial protection. It allows you to check if you’re adequately covered to meet your financial needs.
The critical illness protection gap is the difference between your protection needs and the resources available. To put it simply, if you stopped working, would you have sufficient resources to pay for all the ongoing expenses and financial obligations for you and your family? If the answer is no, then there’s a gap.
Here’s the formula for calculating your critical illness protection gap:
| Critical illness protection needs | Resources available | |||
| Approx. 3x annual income | - | insurance/takaful coverage + Total savings | = | Critical illness protection gap |
Let’s look at an example. Suppose you just turned 30 years old and earn a median salary of RM5,790. In addition, you have an existing critical illness coverage of RM50,000 and have saved RM70,9913.
| Critical illness protection needs | Resources available | Critical illness protection gap | ||
| RM5,500 x 12 months x 3 = RM208,440 | - | Existing RM50,000 coverage + RM30,500 savings = RM80,500 | = | RM208,440 – RM80,500 = RM127,940 |
Note: Based on the assumptions stated above for illustrative purposes only.
This formula helps determine whether you need more coverage on top of existing critical illness coverage. The results above means that an average Malaysian who earns RM5,500 and a pre-existing RM50,000 CI coverage may not be adequately covered and financially ready in an unfortunate event of being diagnosed with CI.
What is the cost of critical illness treatment?
Unfortunately, it’s costly to treat critical illness. Some critical illnesses may require a longer treatment duration and recovery time. Depending on the severity of the disease, you may need surgery, chemotherapy or more.
Your medical card may provide some coverage for hospitalisation and selected outpatient cancer treatments, but it may not necessarily cover all critical illness treatments.
Such plans typically require some form of co-payment, meaning you have to pay a portion of the claimable amount. In addition, medical plans often have claim limits on their benefits. On the other hand, critical illness plans pay you in one lump sum upon a successful claim, which gives you the flexibility to use for treatment or other expenses. In fact, there are more differences between hospitalisation plans and critical illness plans.
What critical illnesses should you get covered for?
Another key consideration when determining the adequacy of your coverage would be to review the types of critical illnesses you are covered for. Here is a generic categorisation which may help you as you consider the different types of critical illnesses.
Plans that cover the list of 36 critical illnesses
There are the standard 36 critical illnesses that are covered by some of the providers in the market. If you are looking for a more comprehensive coverage, there are plans which cover beyond the standard cancer, heart attack and stroke, with other critical illnesses available.
Three most common critical illnesses in Malaysia
Apart from knowing the various critical illnesses in Malaysia, you should also know the most common types and consider getting protection for them. These three critical illnesses make up 78%* of all critical illness claims in Malaysia:
- Cancer
- Heart attack
- Stroke
*Based on FWD internal claims as of Dec 2022
Getting adequate critical illness coverage
FWD Big 3 Critical Illness is an affordable plan that offers financial protection for cancer, heart attack or stroke. The plan pays out 100% of the sum covered upon a successful claim. There is also an option to enhance your coverage to cover for 24 other neurological and heart disorders. FWD Big 3 Critical Illness can cover up to RM250,000 for as low as RM19.48/month (based on 30-year-old male, non-smoker).
