WHAT IS CRITICAL ILLNESS COVER?

What is critical illness insurance?

Critical illness cover is an insurance policy that provides a tax-free one-time payment if you’re diagnosed with or have surgery for a critical illness defined in the policy during its term, and you survive for at least 10 days.

This cover is specifically for the illnesses listed in the policy and doesn’t include others.

The purpose of this insurance is to offer financial support for you and your family during your illness, allowing you to concentrate on getting better without the stress of financial burdens like paying bills.

What’s the difference between critical illness cover and life insurance?

Critical illness cover provides financial support for you and your family if you are diagnosed with a specific medical condition.

It offers a one-time payment to help with treatment costs or to manage regular expenses.

This type of insurance typically doesn’t include a payout upon death; that’s the role of life insurance. Life insurance is designed to provide for your family after you’re gone, like taking care of mortgage payments or funding children’s education, and it pays out if you die within the policy’s term.

Many insurance providers offer both critical illness cover and life insurance together. It’s important to understand the distinct benefits of each policy before making a decision.

Keep in mind that both life insurance and critical illness cover provide a payout only once upon a valid claim and then conclude. They do not accumulate cash value over time. Also, your coverage ceases if you stop making premium payments.

What is a terminal illness benefit?

Some insurance providers include a terminal illness benefit with their life insurance policies.

This feature allows you to receive your life insurance payout early if you are diagnosed with a terminal illness that matches the policy’s criteria and are expected to live less than 12 months.

Some include this benefit in their life insurance coverage, but not all insurance companies do. Therefore, it’s crucial to carefully review the terms and conditions of any policy you consider with another provider to ensure it meets your needs.

How does critical illness cover work?

The extent of your coverage will depend on how long you want your policy to last and how much you’re willing to pay each month. Ideally, you should have coverage for as long as you have significant financial responsibilities, like an ongoing mortgage or children’s education costs.

Then, you’ll need to decide between level cover and decreasing cover.

• Level cover involves selecting a lump sum that fits your needs and deciding the duration of your coverage. Your monthly payment remains consistent throughout the policy term. This option is suitable if you want to ensure general expenses, any extra costs due to health issues, and other financial obligations are met.

You can also opt for your cover amount to increase with inflation. While this choice might lead to higher monthly payments over time, it ensures the lump sum retains its value in the face of rising living costs.

• Decreasing cover, on the other hand, means the value of your cover reduces each month, but your monthly payment remains unchanged for the policy’s duration. This is a good fit if you aim to cover decreasing debts or loans, like a repayment mortgage, where the owed amount reduces over time.

Who needs critical illness cover?

Critical illness cover is an important decision, especially in situations where:

• Your salary is crucial for supporting yourself and your family.
• You lack sufficient savings to sustain you in case of a serious illness or disability.
• Your employment benefits don’t provide long-term support for extended sickness absences.

How much cover do you need?

Think about the expenses you’d need to manage if you became ill and couldn’t work, such as everyday costs like utility bills and groceries.

If you have a family, level cover can provide the necessary financial security to support them in case you’re unable to work due to health issues. It’s also a way to ensure your family’s needs are met.

Alternatively, you might need a policy to cover your mortgage, often a requirement for mortgage applications. Decreasing cover is good for this purpose as it aligns with the diminishing debt of a repayment mortgage.

For comprehensive protection, it’s common to combine critical illness cover with life insurance. This approach covers a range of scenarios, allowing you to tailor the coverage amount for each policy according to your needs.

Which illnesses are covered?

When considering critical illness insurance, it’s important to remember that these policies do not cover every type of illness.

Typically, they include a range of specified conditions, such as major diseases and health events like heart attacks, strokes, Alzheimer’s disease, and certain forms of cancer, as outlined by standard industry guidelines.

Many policies also extend coverage to children, often at no extra cost, providing additional peace of mind for families. For those seeking broader protection, there are options to include coverage for a wider array of conditions.

It’s always advisable to review the specifics of any policy carefully to understand exactly which conditions are covered. This information is usually detailed in the policy documentation or summary provided by the insurer.

Can you get cover after being diagnosed?

When applying for critical illness cover, most insurance companies will ask about your medical history.

Be sure to tell your insurer about any pre-existing conditions you have at the time of applying for the policy.

Having a pre-existing condition doesn’t automatically disqualify you from getting coverage. However, certain conditions that increase the likelihood of future illnesses might lead the insurer to decide against providing critical illness cover.