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Can whole-of-life critical illness insurance build savings? How much can you accumulate?
Whole-of-life critical illness insurance has always been popular. Policyholders can obtain critical illness protection, while the products themselves also include a savings component. If the policyholder remains healthy, they can also “get some money back”, achieving the effect of “medical expenses covered in the event of illness, and savings in the absence of illness”. Of course, the key focus of critical illness insurance products is protection against serious illnesses such as cancer, heart disease and stroke, with the savings element merely an added benefit. Nevertheless, as consumers, we naturally expect the policy to recover its costs as soon as possible, giving us greater flexibility in deciding how to use the funds. If we are fortunate enough to remain healthy and do not need to make a claim, we may also choose to surrender the policy in future and recover the premiums paid.
We selected the currently popular whole-of-life critical illness insurance products on the market, reviewed the years in which they guarantee a return of premiums, and calculated their guaranteed internal rates of return (guaranteed IRR) and expected internal rates of return (expected IRR) over specified periods. The latter includes both guaranteed and non-guaranteed components. The assumptions used in the following 10Life calculations are as follows: the policyholder is a 35-year-old non-smoking male, paying premiums for 20 years (or the option closest to 20 years).
Comparing whole-of-life critical illness insurance products: critical illness protection VS savings returns
Assuming the policyholder is male, with a 20-year premium payment period (or the option with the closest premium payment period to 20 years)
| Insurer and product | 10Life critical illness protection rating (male) | Savings returns | ||||
| Year of guaranteed payback | 20-year guaranteed internal rate of return | 30-year guaranteed internal rate of return | 20-year expected internal rate of return | 30-year expected internal rate of return | ||
| FTLife | Guardian 168 2 | 8.5 | 20 | 0.0% | 0.0% | 2.8% | 4.4% |
| China Life | Critical Illness Multiple Protector (SS) | 8.3 | 42 | -4.1% | -0.6% | -0.7% | 2.2% |
| YF Life | Preferred Health Protection 500+ | 8.3 | 25 | -6.5% | 0.2% | -2.8% | 4.2% |
| Manulife | Active Life Critical Illness Insurance | 8.2 | 25 | -2.8% | 0.0% | 1.9% | 3.7% |
| FWD | Critical Illness Protector (Superior Version) | 8.1 | 30 | -2.3% | 0.1% | 2.4% | 3.8% |
| AXA | Health Essential II Critical Illness Protection (Early-Stage + Multiple Add-on Benefits) | 8.1 | 49 | -19.0% | -2.5% | -10.5% | 0.4% |
| Sun Life | SunHealth OmniCare Plan 2 | 7.8 | 30 | -7.2% | 0.0% | 0.5% | 3.0% |
| Prudential | Critical Illness First Guard | 7.3 | 50 | -10.5% | -2.9% | -3.1% | 1.8% |
| AIA | Smart Elite Ultra | 7.2 | 55 | -5.8% | -2.1% | -1.4% | 1.5% |
| BOC Life | BestCarePro | 6.4 | 15 | 0.2% | 1.0% | 0.5% | 2.9% |
| Notes: 1. Product information was updated as at 24 June 2020. 2. 10Life collects information on insurance products through various channels and derives the above information through assumptions and mathematical calculations. It is provided for general educational and reference purposes only and does not constitute advice to purchase any insurance product. Before purchasing any insurance product, users should consult a licensed insurance adviser regarding an insurance solution suitable for them. 10Life shall not be liable for any claims and/or losses arising from the accuracy, completeness or timeliness of the information sources. 3. Assuming the policyholder is a 35-year-old non-smoking male, with a 20-year premium payment period (or the option with the closest premium payment period to 20 years) and a basic sum assured of US$150,000. 4. The payback year, guaranteed internal rate of return and expected internal rate of return of whole-of-life critical illness products do not affect the 10Life critical illness protection rating. If you would like to learn more about the methodology for the above critical illness protection ratings, please visit www.10Life.com | ||||||
Among the whole-of-life critical illness insurance products above, BOC Life BestCarePro has the shortest guaranteed payback period, at only 15 years. For adult males, FTLife Guardian 168 2, which has the highest critical illness protection rating in the table above, also requires only 20 years to guarantee a return of premiums. In other words, once the policyholder has finished paying premiums, they can recover the full amount of premiums paid if they choose to surrender the policy, while receiving critical illness protection throughout the premium payment period.
In the guaranteed payback year, the premiums paid by the policyholder will equal the guaranteed cash value of the policy. However, please note that if the policyholder withdraws part of the guaranteed cash value after the guaranteed payback year, the sum assured for critical illness protection will also be reduced. If the guaranteed cash value is withdrawn down to zero, the critical illness protection will become invalid accordingly, which is equivalent to surrendering the policy.
In the chart above, if a product’s IRR for a specified period is negative, this means that the product has not yet recovered its costs. Generally speaking, the guaranteed returns (or guaranteed IRR) of whole-of-life critical illness insurance are not high. This is because the primary purpose of these products is not to save or make money, but to provide critical illness protection.
Whole-of-life critical illness insurance may also pay cash dividends and interest, generating expected returns (or expected IRR). However, these are non-guaranteed and are not protected under the policy contract. During the policy term, withdrawing non-guaranteed income such as cash dividends and interest (if any) will not affect the basic sum assured for critical illness protection.
This article focuses solely on analysing the savings returns of whole-of-life critical illness insurance products and does not discuss critical illness protection, which is the key focus of critical illness insurance. Please visit the “Product Decoder Comparison” section on the 10Life website. In addition to the products listed in this article, we have analysed the critical illness protection and savings returns of nearly 50 whole-of-life critical illness insurance products currently available on the market.
Compare whole-of-life critical illness insurance, adults, non-smoking males
Compare whole-of-life critical illness insurance, adults, non-smoking females
If you have any questions about insurance, you can use “Enquire” or “Ask a question anonymously” on the 10Life website to receive the opinions of multiple licensed advisers immediately.
Note:
1. The above information is provided by 10Life and is not sales advice.
This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.
10Life Editorial Team
Our team of professional content researchers focussing on insurance
10Life Editorial Team
Our team of professional content researchers focussing on insurance
Disclaimer
10Life Product Comparison and 10Life Insurance Ratings are developed by 10Life Financial Limited, an authorised insurance broker company licensed with the Insurance Authority under License Number FB1526. 10Life Product Comparison and 10Life Insurance Ratings are developed for generic customer segments using mathematical calculations based on product information, facts and data, and are not influenced by any partnerships with or fees received from insurance companies. Any information on 10Life Platform ("10Life Information"), including but not limited to Product Comparison, Product Ratings, Blog Articles are intended for general education purpose and reference only. None of the 10Life Information is intended, nor should they be considered or relied upon, as regulated advice, insurance, financial, investment or professional advice, recommendation, approval, endorsement, invitation or solicitation in respect of any insurance, financial or investment products. 10Life Information does not take into account your individual needs. Reading 10Life Information should not be considered as conducting a suitability assessment, and is not sufficient to form the basis of any decisions to purchase any insurance products. You should rely on information authorised by insurance companies, carry out your own research and/or seek independent advice from licensed intermediaries before purchasing any insurance products or making any insurance decisions. While reasonable effort is used when collecting, validating and updating 10Life Information from various channels, none of 10Life Group and its subsidiaries, affiliates, agents, directors, officers and employees will be responsible for any liability, claim or loss arising from or associated with you using 10Life Information. No warranty, representation or guarantee is given by 10Life Group and its subsidiaries on the accuracy, completeness and timeliness of the information. If you have any questions on 10Life Product Comparison and 10Life Insurance Ratings, please email us at enquiries@10life.com
