You might have spent years accumulating the wealth you need to provide a comfortable lifestyle for yourself and your family. So, by the time you hit your 50s, you may be well on the way to the retirement you’ve always dreamed of, thanks to hard work, diligent saving, and savvy investing.

However, if you don’t have a financial safety net in place, your plans could go awry if something unexpected occurs, such as a serious illness.

Indeed, rising medical costs around the globe could mean that your savings may diminish more quickly than you might expect if you become unable to work for an extended period – no matter how many assets you’ve built up over the years.

So, critical illness cover – which pays out a lump sum if you‘re diagnosed with certain major illnesses– could be a crucial part of your financial plan.

If you’ve been resisting taking out such cover, because you think “it won’t happen to me”, read on to discover why this and other myths aren’t true, and how critical illness cover could provide invaluable peace of mind for you and your loved ones.

1. “Insurance companies never pay out”

There’s a common misconception that insurance companies try to “trick” customers with sneaky loopholes, get-out clauses, and exclusions.

So, maybe you’ve put off buying critical illness cover because you worry that if a time comes when you need to make a claim, your provider will find any excuse not to pay out.

Of course, insurers need to set eligibility criteria and evaluate all claims thoroughly. But there’s plenty of data to show that the statement, “insurers never pay out” is a myth.

Figures released by one of the leading insurers in Hong Kong, Chubb, reveal that in 2023, they approved 97% of all claims and 89% of critical illness claims.

The chart below shows the amount the insurer paid for different claims. Nearly 44% of all claimants received up to HK$250,000, and almost 30% received between HK$250 and HK$500,000.

Source: Chubb

Likewise, in the UK, data published by the Association of British Insurers (ABI), reveals that 90.5% of new critical illness claims were paid in 2023, and the average amount paid was £68,354.

Where providers did not pay out, this was often due to policyholders failing to disclose existing medical conditions when they took out their cover.

2. It’s too expensive at my age to take out critical illness cover

While you may face higher premiums for protection in your 50s than you might have paid in your 20s, there are many ways you can insure yourself against critical illness.

This choice puts you in control of how much you pay each month, enabling you to align your protection needs with your budget.

For example, adding critical illness to a life insurance policy is often a more affordable option than taking out standalone cover.

Alternatively, if you have a solid retirement income in place, you might only need critical illness protection for the duration of your working life. This is likely to mean that your monthly premium is lower than if you needed cover for a longer period.

It’s important to note that the cost of protection will depend on your individual circumstances and preferences, including:

• Your age
• Your smoker status
• The type and amount of cover you need
• The policy length
• Lifestyle factors
• Your occupation
• Whether you have any pre-existing health conditions.

The table below from the UK insurance broker, Reassured, shows example quotes for critical illness cover for a non-smoker, in good health, seeking a 20-year policy and a sum assured – a pre-defined amount that the provider agrees to pay you if the insured event occurs – of £50,000.

Source: Reassured, 2024.

As you can see, the cost varies depending on individual circumstances and the provider chosen.

Ultimately, whatever the price of your critical illness cover, you might decide that protecting your family’s financial security is a worthwhile investment.

If you’re concerned about paying out for protection that you may never need and therefore “losing” the money you invest each month, you might find it reassuring to learn that a growing number of providers now offer a refund of your premium if you don’t claim.

3. I have accumulated sufficient wealth to self-insure

If you’ve built up a healthy amount of wealth, you might feel comfortable putting the risk of an unexpected illness on your own balance sheet.

Unfortunately, we’ve seen many clients adopt this approach to their detriment over the years.

The cost of ongoing medical care or an extended period out of work could rapidly erode your hard-earned savings and investments. As a result, you and your loved ones may be forced to detrimentally change your lifestyle and compromise your long-term plans.

Importantly, critical illness cover is different to medical insurance or healthcare. According to Engage Britain, nearly half of UK adults using private healthcare are being forced to cut back on spending, use their savings, or go into debt to pay for it.

Similarly, Insurance Asia has reported that 69% of Hong Kong residents cite rising health costs as a barrier to financial wellbeing, due to healthcare expenses rising 18% between 2023 and 2024.

So, putting critical illness in place could be a cost-benefit. While you’ll be adding to your monthly expenses, you move the risk of experiencing potential serious illness from your balance sheet to your insurance provider’s balance sheet.

As you can see from the chart above, the monthly cost of critical illness cover could be relatively low. Yet, taking out this protection could provide invaluable financial support when you and your family need it the most.

4. I’m young and healthy, it won’t happen to me

Perhaps you’ve put off taking out critical illness cover because you think, “it won’t happen to me”.

Unfortunately, no one has a crystal ball and even the most seemingly fit and healthy person could experience an unexpected health complication at any age. A sad example of this is former Olympic track cyclist, Sir Chris Hoy, who recently announced at the age of 48 that he has terminal cancer.

Indeed, data published by Chubb revealed that people aged 60 and under represented 75% of their Hong Kong claims in 2023. This highlights the fact that critical illness doesn’t always discriminate by age.

The chart below shows the number of critical illness claims and the average claim amount by age group.

Source: Chubb

This demonstrates that critical illness cover could be a wise investment at any age.

What’s more, although you might have a lower risk of experiencing certain health conditions if you’re otherwise fit and well, the most common claims for critical illness are for conditions that could affect anyone.

According to data published by UK insurer Aviva in 2023, 58% of all claims were for a cancer diagnosis, rising to 74% of all claims for women. The second most common claim was for a heart attack, which was more prevalent for men (17% of all male claims) than women (4% of female claims).

So, whatever your health status, age, lifestyle, or gender, including critical illness cover within your financial plan could help to protect you and your family’s future.

Get in touch

To find out more about embedding financial protection in your plan, please get in touch.

Email info@bmpwealth.com or call +852 3975 2878.