The value of critical illness insurance

Growing up, one of the catchiest advertising phrases I heard was from a multivitamin commercial – “bawal magkasakit.”

The commercial highlights the importance of being healthy. Truth of the matter is, our country’s health care system is not really much help to us. We are left on our own. If you are not rich, you are forbidden to get sick.  

A research study revealed this glaring statistics: 95% of Filipinos will sacrifice their savings to treat a critical illness – their own or a relative’s. What is worse, albeit not surprising, is the cost of treatment. In 2011, Filipinos spent P431 billion ($9.87 billion*) for health expenses alone.

The cost of a dreaded illness is high. Cancer, for example, will cost you half a million pesos upwards. Heart bypass costs more than a million pesos. Stroke, too. Both young and old are dying because of these illnesses.

One story I would like to share with you is that of a colleague. When her mom contracted cancer, she had to borrow P2 million ($45,798.04) from the bank to fund the treatment. The P2 million was a reprieve; in the end, it was for naught.

Her mother never recovered, and my colleague also had to spend a fortune on her funeral. She lost her mom, had her savings wiped out, and still owed the bank. Talk about triple jeopardy.

Why avail of critical illness insurance?

Fortunately, Filipinos are not without any tool to combat this growing concern. Critical illness insurance addresses this need. This type of insurance is offered by life insurance companies and fills the gap that Health Maintenance Organizations (HMOs) cannot provide.

When the policy holder is afflicted with a dreaded illness, the insurance company pays him/her the whole benefit amount indicated in the contract so that he/she will have enough funds (hopefully) to avail of the best medical treatment possible.

It works like a car insurance. When the car is damaged, the company pays for the repair costs.

But that’s not all. Critical illness insurance also helps fund recuperation aids, and even replaces lost income due to decreasing ability to earn. Or pay off any loan incurred during treatment.

However, while it is clear a critical illness insurance is an integral part of one’s financial portfolio, based on my personal experience, people are still averse to it. This is despite this type of insurance having a low premium – P8,000 ($183.25) for a P1 million ($22,906.82) coverage. Often, people do not find it attractive because it is non-earning. They would rather go for something that has an investment component.

Here’s the thing: Would you wish to contract an illness just so you could recoup the premiums you paid (or in my analogy above, would you wish to crash your car just so you could get something from your auto insurance company)?

The only thing worse than getting sick is getting sick with no money to fund the treatment. Our loved ones will suffer the most – emotionally and financially.

I can’t bear that thought. Can you? – Rappler.com

Kendrick Chua is a registered financial planner of RFP Philippines. He writes regularly about personal finance. He is also a Chinese language instructor, TV host, free runner, and violinist. To learn more about RFP, you may email info@rfp.ph.

($1 = P43.66)