Is critical illness insurance worthwhile? Analyse its coverage and benefits.

Many people understand the importance of medical insurance, but even if you already have medical cover, do you still need to purchase critical illness insurance? What does critical illness insurance actually cover? Why do you need it? In fact, critical illness insurance and medical insurance serve different purposes, and critical illness insurance can provide protection against risks not covered by medical insurance. This time, 10Life will explain in detail the definition and scope of cover of critical illness insurance, as well as how it differs from medical insurance, to help you understand your actual needs.

Critical illness insurance is an insurance product specifically designed to cover serious illnesses. Its purpose is to provide the insured person with financial support during the illness, thereby alleviating the financial burden on them and their family.

When the insured person is diagnosed with a serious illness covered by the plan, the insurance company will provide a lump-sum cash payout. The insured person can use the money flexibly, for example, to pay medical expenses and living costs, or to make up for the loss of income resulting from being unable to work during the illness and treatment period.

Critical illness insurance can be divided into term critical illness insurance and whole-of-life critical illness insurance:

Term critical illness insurance

Term critical illness insurance is also known as “pure critical illness insurance” or “consumption-based critical illness insurance” and does not include any savings component. The coverage period may be 1, 5, 10 or 20 years, depending on the insurance company. Most term plans provide a one-off payout only, and the policy will terminate after the insured person receives the payout. However, in recent years, some insurance companies have also introduced term plans under which claims can be made multiple times or even an unlimited number of times.

Whole-of-life critical illness insurance

Whole-of-life critical illness insurance is also known as “savings-based critical illness insurance”. In addition to providing critical illness cover, it also includes savings features, including a cash value and surrender value. The premiums are generally higher, but the insured person only needs to pay premiums for a specified period for the policy to provide lifelong cover. Some plans go further by providing critical illness payouts multiple times or even an unlimited number of times, offering more comprehensive protection.

Many people believe that having medical insurance is sufficient to cover all expenses in the event of illness. However, when faced with serious illnesses such as cancer, stroke or heart disease, medical insurance alone may not be enough. These illnesses often require long-term treatment, and patients may be physically unable to work as usual, resulting in a loss of income. In addition, expenses for hospitalisation, surgery, rehabilitation, and even assistance with daily care can place significant financial pressure on the family.

Although medical insurance can reimburse some treatment costs, the additional living expenses and the pressure of losing income are often the most difficult challenges to bear. This is where critical illness insurance can play a vital role. Critical illness insurance can provide a lump-sum cash benefit immediately, allowing the insured person to use the funds flexibly without having to worry about the impact of an interruption in income. It not only protects the patient, but also provides support for the family, helping them maintain a basic standard of living during a challenging period while focusing on treatment and recovery.

Critical illness insurance generally covers common serious illnesses, such as cancer, stroke, heart disease, kidney failure, major organ transplants and multiple sclerosis. Some plans also cover early-stage critical illnesses or carcinoma in situ. However, different policies have different definitions of critical illnesses, so you should understand the relevant details when taking out a policy.

In terms of how claims are paid, critical illness insurance usually provides a lump-sum cash payment and is mainly divided into two types: “single payout” and “multiple payouts”. “Single payout” means that once the insured is diagnosed with a critical illness and receives a payout, the policy terminates. “Multiple payouts”, on the other hand, allows further claims to be made if the critical illness recurs or the insured suffers from another covered illness. The number of payouts and the maximum amount will depend on the terms of the policy.

As for the sum assured, it is generally advisable to use two to three times your annual income as a reference, to ensure that you have sufficient funds to cover medical expenses and daily living expenses during the illness. Critical illness insurance policies on the market generally offer sums assured ranging from several hundred thousand to several million, and policyholders can make their choice according to their personal financial circumstances and protection needs.

Medical insurance and critical illness insurance serve very different purposes. Medical insurance operates on a reimbursement basis and is mainly used to reimburse reasonable medical expenses actually incurred, such as hospitalisation, examinations and surgery, helping insured persons reduce the burden of treatment costs.

Critical illness insurance, on the other hand, covers specified serious illnesses, such as cancer, stroke and heart disease. Once a diagnosis is confirmed, a lump-sum cash benefit will be paid. This amount is not restricted to any particular use: it can cover not only medical expenses, but also living expenses and the financial pressure arising from taking time off work or an interruption to income, giving patients greater peace of mind while receiving treatment.

Although the premiums for both types of insurance increase with age, their forms of cover and functions differ. Put simply, medical insurance is used to pay medical expenses, whereas critical illness insurance provides flexible financial support. The two do not replace each other; rather, they are complementary.

In fact, anyone can develop a serious illness, so regardless of age or background, it is worth considering taking out critical illness insurance. For the main breadwinner in a family, if illness prevents them from working, an interruption to their income could affect the household’s livelihood; for homeowners with a mortgage, the loss of income could make it difficult to keep up with mortgage payments; and for retirees, who have no regular income, falling ill could mean having to use their savings. However, critical illness insurance can provide a lump-sum cash payment to help cover everyday expenses.

As for young people, do not assume that you do not need insurance simply because you are healthy. In fact, critical illnesses have been affecting people at younger ages in recent years. According to government data, the number of new cancer cases among people aged 20 to 44 rose by 14% between 2010 and 2019, so they face risks too. In addition, taking out insurance when you are young means premiums are lower and your application is more likely to be approved based on your health, so the earlier you prepare, the more comprehensive your protection will be. 

Scope of Cover

The types of illnesses covered, their definitions and the coverage provided vary between critical illness insurance policies. The most common critical illnesses include cancer, stroke and heart disease, while some policies cover more illnesses or include early-stage illnesses, such as carcinoma in situ and early-stage heart disease, as well as specified procedures, such as angioplasty.

Some plans also offer multiple-claim benefits. However, it is important to note that the definitions of illnesses and diagnostic requirements vary between policies, and there may also be restrictions on whether a subsequent claim involving the “same organ” is covered. Before taking out a policy, you should read the terms and conditions carefully to understand the illnesses covered, claim conditions and exclusions.

Moreover, a policy covering more illnesses is not necessarily better. More importantly, you should choose a product that covers illnesses relevant to your actual needs. You should also note that the sum assured is often more important than the number of illnesses covered, because after understanding the scope of cover, the key consideration is whether you can receive sufficient compensation.

Sum Assured

Everyone has different needs when it comes to the sum assured for critical illness insurance, but the key is to ensure that you can maintain your basic living expenses even if your income is interrupted during an illness. It is generally recommended to use two to three times your annual salary as a starting point, then adjust this according to your actual expenses, mortgage commitments and family responsibilities. For example, if you are the main breadwinner in your family, or need to pay a mortgage and look after children, you should consider taking out a higher sum assured to cope with potential financial pressure.

Policy Term

Term critical illness insurance provides cover for a shorter period, generally from 1 to 20 years, and is more suitable for people with a limited budget or those who only require short-term cover. Whole-of-life critical illness insurance provides longer-term cover, with some plans offering protection for life or up to the age of 100. Most also include a savings element, making them suitable for people who wish to address both protection and financial planning needs.

Waiting Period and Survival Period

Most critical illness policies include a waiting period, such as 60 or 90 days. Even if you are diagnosed during this period, no claim will be paid. In addition, some policies include a survival period clause, which means that you must survive for a specified number of days after diagnosis, usually between 14 and 30 days, before a claim can be paid. If you unfortunately die during the survival period, you may not be entitled to a critical illness benefit. These terms affect the actual protection provided and should be carefully considered before taking out a policy.

Pay Attention to the Restrictions on “Multiple Claims”

Some critical illness insurance plans offer “multiple claims”, but these are subject to restrictions. For example, a specified period, such as one year or more, may have to elapse between claims, while claims from the second claim onwards may only cover different illnesses or different organs. Some policies also impose a limit on the amount payable for each claim, such as paying only 25% or 30% of the original sum assured. Therefore, even if a policy is described as offering “multiple claims”, the actual cover may still be subject to limitations, and the relevant details must be checked carefully.

Whether It Includes a Savings Element

Critical illness insurance can be divided into “term critical illness insurance”, which provides protection only, and “whole-of-life critical illness insurance”, which includes a savings element. Whole-of-life critical illness insurance usually has a cash value, allowing you to receive part of the amount when the policy is surrendered, but the premiums are generally higher. If you only require basic protection, consider term critical illness insurance, which has lower premiums and no savings function. You can choose a suitable insurance product according to your own needs.

There are many critical illness insurance options on the market. How should you choose? As a Hong Kong insurance comparison platform, 10Life has introduced a rating system designed by actuaries to compare different insurance products fairly, enabling consumers to select the insurance product that best suits their needs. View 10Life’s whole life critical illness insurance and term critical illness insurance comparisons now to learn more.

Further reading:
What is the waiting period for critical illness insurance? Key considerations when purchasing critical illness insurance
[Medical insurance for seniors] Can a 60-year-old take out insurance? What should you pay attention to when applying?
[Critical illness insurance comparison 2025] Which whole life critical illness insurance is best? Key features of 5-star insurance revealed

References:
1.    Insurance Authority. The role of critical illness insurance
2.    Investor and Financial Education Council. Critical illness insurance
 

Last updated: 11 June 2025

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.