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How to analyze a cancer insurance policy
18 Apr 2021 (229 views)

This is how a customer can analyze a cancer insurance policy - is it worth while to buy the policy?

Take the following case study.

a) The insurance agent recommends a customer to buy a insurance policy to cover cancer 
b) The agent provides a benefit illustration. 

The customer should ask the agent to explain:

a) How much is the premium payable each year?
b) What are the benefits payable under the policy?
c) What is the chance of occurrence of the event and the amount of benefit that is payable?

The customer can ask the agent to provide the calculation in an Excel sheet, as shown below. It shows the value of each benefit and the total value of all the benefits.

The value depends on the amount of the benefit and the probability of a claim during te year. If the probably is higher, the value is higher.

The agent may find it difficult to provide the figure on the probability. The agent can ask the actuary of the insurance company. They have the data on the probability of a claim. 

In the example below, the value of the benefit is $195. If the premium is 1.5 times of the value of the benefit, the policy is fairly priced. Even if the premium is 2 times of the value of the benefit, it is acceptable.

If the agent is not able to provide the probability of each claim, the customer should avoid buying the cancer insurance policy.

Tan Kin Lian




 


How to analyze a cancer insurance policy
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This is how a customer can analyze a cancer insurance policy - is it worth while to buy the policy?

Take the following case study.

a) The insurance agent recommends a customer to buy a insurance policy to cover cancer 
b) The agent provides a benefit illustration. 

The customer should ask the agent to explain:

a) How much is the premium payable each year?
b) What are the benefits payable under the policy?
c) What is the chance of occurrence of the event and the amount of benefit that is payable?

The customer can ask the agent to provide the calculation in an Excel sheet, as shown below. It shows the value of each benefit and the total value of all the benefits.

The value depends on the amount of the benefit and the probability of a claim during te year. If the probably is higher, the value is higher.

The agent may find it difficult to provide the figure on the probability. The agent can ask the actuary of the insurance company. They have the data on the probability of a claim. 

In the example below, the value of the benefit is $195. If the premium is 1.5 times of the value of the benefit, the policy is fairly priced. Even if the premium is 2 times of the value of the benefit, it is acceptable.

If the agent is not able to provide the probability of each claim, the customer should avoid buying the cancer insurance policy.

Tan Kin Lian