How to plan financially for unexpected health issues like cancer

Among those with health and/or critical illness insurance policies, only 5 per cent were very confident that their policies would fully cover the cost of treatment in the future, while 29 per cent were not confident at all.

SINGAPORE - Many here are not well-prepared financially to cope with cancer if and when it strikes, a study has found.

About four in 10 of those polled said they would not be financially prepared to manage the costs of cancer treatment.

Respondents cited unaffordable premiums as the key reason for not getting insurance coverage for cancer.

Even among those with health and/or critical illness insurance policies, only 5 per cent were very confident that their policies would fully cover the cost of cancer treatment in the future, while 29 per cent were not confident at all.

These findings from a survey of 1,200 Singapore residents were released in January 2024. The survey was conducted in August and September 2023 by Blackbox Research and is part of an ongoing study by DBS Bank, the National University Cancer Institute, Singapore (NCIS) and Research for Impact Singapore.

Cancer is the leading cause of death here, accounting for 28.2 per cent of all mortalities between 2017 and 2021, according to the most recent annual report from the Singapore Cancer Registry.

Over that period, lung, colon and rectum, and liver cancers were the main cause of deaths among males, while for females, breast, colon and rectum, and lung cancers had the largest number of mortalities.

Dr Jen Wei Ying, a consultant with the Department of Haematology-Oncology at NCIS, said the potential costs associated with a cancer diagnosis depend on several factors, such as the type of cancer, the stage of cancer, the treatment plan and the patient’s overall health conditions.

One major expense is medical bills, which often include hospitalisation and costs of treatments such as chemotherapy or radiation therapy, Dr Jen said.

There are also costs associated with blood tests, scans and cancer drugs, she added.

The Government provides a comparison of the fees for common conditions and procedures charged by the different hospitals in Singapore.

For instance, for the surgical removal of a breast, the typical bill for day surgery at a public hospital ranges between $1,739 and $2,520, based on bills transacted between January and December 2021. The expenses go up to between $1,750 and $2,527 for inpatient stay of more than a day.

Mr Jeremy Soo, head of consumer banking at DBS Singapore, said someone looking to reduce or mitigate the out-of-pocket expenses may want to consider an Integrated Shield Plan (IP) that can pay for stays in class A and B1 wards in public hospitals, or in private hospitals.

The IP provides coverage on top of MediShield Life, which is a basic health insurance scheme providing lifelong coverage for subsidised treatment in class B2 and C wards in public hospitals.

Mr Soo said that with an IP, an individual can also claim up to five times of the MediShield Life limit for outpatient cancer drug treatments and services like scans and lab investigations.

About four in 10 of those polled said they would not be financially prepared to manage the costs of cancer treatment. They cited unaffordable premiums as the key reason for not getting insurance coverage for cancer.

On top of medical bills, most people will have other financial or family obligations.

Mr Alfred Chia, chief executive of financial services provider SingCapital, said that if cancer strikes someone, he may not be able to work or he may want to take time off to recuperate properly.

In such cases, the person would lose his monthly source of income but may still have a mortgage or other loans to pay off besides household expenses, Mr Chia added.

Therefore, there is a need to plan for this potential loss of income and look for ways to replace it.

Critical illness (CI) insurance plans provide a lump-sum payout that can be used to offset cancer treatment costs or pay for daily living expenses.

There are ways to manage the costs of premiums to keep within budget constraints.

Mr Soo recommended prioritising severe-stage CI insurance and then getting CI cover for early stage critical illness when more money is available.

He added that premiums can be relatively affordable if one buys a term insurance plan.

A term plan provides protection only for a certain number of years and is therefore cheaper than a whole-life plan with a critical illness rider, which provides protection for life.

“The priority is to get CI coverage until your planned retirement age or when you no longer have dependants,” he added.

Mr Ng Eng Beow, president-elect of the Insurance and Financial Practitioners Association of Singapore, noted that there are policies that cover either all stages of cancer or advanced-stage cancer only.

CI plans that cover only cancer can be relatively cheaper than traditional CI plans that cover a wider variety of critical illnesses.

Mr Soo said that another way to manage the costs of insurance protection is to get adequately insured when one is still healthy, instead of waiting until illness strikes to do so.

Premiums will be lower if one is healthy when starting a plan. Also, one would not have any pre-existing illnesses or conditions that will be excluded from coverage.

Mr Chia said that unlike Integrated Shield Plans where premiums go up with age, once an individual locks in his CI premiums at a particular age, his premiums are fixed at that amount.

“For someone who is 40 years old, the premiums are about $1,142 per year. If you buy the policy when you are 50 years old, the premiums will be double, at about $2,300. And, if you buy when you are 60 years old, the premiums will be around $4,700.”

This begs the question – how much coverage is too much?

Mr Chia suggested referring to the Basic Financial Planning Guide that the Monetary Authority of Singapore launched in October 2023 together with the financial industry. It recommends having insurance that covers nine years of salary in the event of death or total permanent disability.

As for CI protection, the guide recommends covering four years’ worth of annual salary. 

Said Mr Chia: “I would add on to say this is basic. People should also factor in their mortgages, their loans and their commitments. You also need to look at your family history and health situation.

“And four years is assuming that you could return to the workforce earning the same level of income.”

In order to strike a balance and avoid over- or under-insuring, the Basic Financial Planning Guide recommends allocating not more than 15 per cent of one’s income to insurance protection.

After purchasing insurance, Mr Ng recommends doing a regular review once or twice a year, “to ensure your umbrella has no holes so that it can shelter you and your family properly”.

This is because there can be changes to an individual’s family situation, such as another child coming along, or to his financial and career situation. A review will ensure that the insurance policies are still able to provide adequate protection for the individual and his family members.

Article repurpose from The Straits Times by Chor Khieng Yuit, Senior Correspondent