Critical illness insurance
Critical illness insurance
Critical illness cover pays a lump sum if you are diagnosed with one of the conditions the contract lists and survive a defined period. It pays whether or not you can still work, and the money has no strings: it can cover treatment, time off, adapting a home, or nothing in particular.
Worth knowing: What is and isn't covered is the whole product, not a footnote.
The list is the product
Every policy covers a defined set of conditions, and each one is defined in the contract rather than in ordinary medical language. Two policies both covering 'cancer' may define the covered stages differently, which is where claims are won and lost.
Many contracts also include partial payments for certain early-stage conditions, at a fraction of the benefit, without ending the policy. Whether those exist, and what triggers them, varies.
Why there is a survival period
Benefits are generally paid only if you survive a set number of days after diagnosis, often thirty. This is not a technicality: it is what separates critical illness cover from life insurance, and it is the reason the two are not substitutes for one another.
How it differs from disability cover
Disability insurance replaces income while you cannot work, paid monthly, and stops when you can. Critical illness pays once, on diagnosis, regardless of whether you return to work the following month.
They answer different questions, which is why people who hold both do so deliberately rather than by accident.
Return of premium, where offered
Some contracts offer an option to have premiums returned if no claim is made, at a higher price. It changes the economics rather than the cover, and whether it is worth it depends on the cost of the option and how long the policy is kept.
Questions people ask
Does it cover every serious illness?
No. It covers the conditions named in the contract, as defined there. Anything outside that list is not covered however serious it is.
What about conditions I already have?
Pre-existing conditions are generally excluded or affect whether cover is offered at all. Health questions at application decide this, and answering them accurately is what makes the policy reliable later.
Is the benefit taxed?
A benefit from a personally owned policy is generally received tax-free. Arrangements involving a corporation are treated differently and are worth specific advice.