Talk to an expert Get Advice and a Quote
Talk to us

What is Critical Illness Insurance?

Critical Illness Insurance pays out when you become seriously ill.

  • A cash lump sum payment.
  • Protection against a major health crisis.

Critical Illness policies can vary so it’s important to select the cover that’s right for you.

We will find you the best cover.


  • About critical Illness Insurance
  • Is Critical Illness Insurance necessary?

Critical illness coverage provides a payout amount to you as the policyholder if you are diagnosed with a critical illness or condition, as defined by your insurance company. This type of life insurance provides money while you are still living in order to help with medical or living expenses. This type of coverage is usually purchased in conjunction with a typical life insurance policy so that the payout occurs either upon diagnosis or death, whichever comes first.

There are many components to critical illness coverage including:

  • Payout occurs at time of diagnosis to certain illnesses or conditions, as defined by the insurer, your symptoms, and the severity of your disease
  • Policy can payout if treatment or operations are required, as defined by insurer
  • Some companies require a survival waiting period between diagnosis and payout
  • Many common conditions are covered by this plan including heart attack, stroke, multiple sclerosis, and cancer. There are other conditions which differ by company.
  • Can be more expensive than regular, standalone life insurance
  • Critical illness coverage often includes children

Critical illness coverage is determined by you as the policy purchaser, deciding how much coverage you’d like to have in the event you are diagnosed with a critical condition or disease. You also choose the time period for coverage, or the term. Monthly premiums are determined by the amount of coverage, your age, and your lifestyle (including smoking habits). A monthly premium must be paid each month to keep the policy active; if payments lapse, the policy will be void and no refund will be made.

Every insurance company has a different list of what defines a critical illness, what treatments and operations are covered, and so on. If interested in purchasing critical illness coverage, make sure to compare lists of different companies. Critical conditions such as stroke, heart attack, cancer, and multiple sclerosis are covered by most insurers.

In addition to comparing the critical illness list, also look at each company’s definitions of illness severity and treatments for which payouts will occur. It’s also important to consider the possibility and likelihood of each critical illness happening to you.

Once again, each insurance company defines critical illness in different ways, often by severity or progression in the disease or condition (cancer is an example of this). Regardless of this, if you are diagnosed with a critical illness, every company will require that your diagnosis be confirmed by a medical professional before a payout can occur.

Is critical illness coverage necessary?

This type of coverage can provide peace of mind to you and your family if you are ever diagnosed with a critical illness. The policy provides dollars to you and your family to use as you wish while you are alive. While critical illness coverage costs more than regular life insurance, you might be at a statistically higher risk of contracting a critical illness during your lifetime than you are to die within the term of your life insurance, so you may want to consider this type of policy to cover you and your family.

Critical Illness and Terminal Illness Coverage - A Comparison

For life insurance companies, there is a difference between critical and terminal illnesses. A terminal illness is different because a medical professional has given you as the patient only 12 months or less to live. All Life Insurance policies include terminal illness coverage.

Terminal Illness Coverage Critical Illness Coverage
Policy pays out on diagnosis when doctor gives less than 12 months ( 1 year) to live Policy pays out on diagnosis of critical illness by doctor, as defined by insurer’s list of illnesses.
Included in all term-life policies without extra fees Optional add-on to life insurance purchase, with extra fee.
Terminal illness coverage is not defined by insurer’s list of diseases, only by a prognosis of less than 12 months ( 1 year) to live, as long as you are not in the last year of your Life Insurance policy Critical illnesses and treatments are limited by insurer’s list.

Critical Illness Coverage for Children

Most insurance companies will include critical illness coverage for your children if you purchase the coverage for yourself as the policyholder, at no extra cost to you. It may not be the same amount of coverage as you purchase for yourself, but could provide some financial assistance in the event your child is diagnosed with a critical illness, as defined by the insurer’s list. The payout amount is usually about half of the sum assured on the policy. Make sure to check the various conditions and diseases that are defined for children from your insurance company, as they might be different from those covered for adult critical illnesses. Finally, if your child is diagnosed with a critical illness and you make a claim to receive a payout; this will not affect your own coverage.

Common questions

  • How expensive is critical illness coverage? aaa

    Making sure your life insurance monthly premium is affordable to your budget is very important because a policy remains active as you continue to pay for it. This is also important to keep in mind if you choose to purchase critical illness coverage. If you think you may want to purchase this additional policy with your life insurance, insurance companies try to assess the risk to them and the chance you will make a claim on this coverage. This assessment, as well as the amount of coverage you want for yourself, is how each company comes up with a monthly premium for you.

    The assessment done by each company is different, but they look at the following factors in order to make a decision on premiums.

    • Age: Older applicants are at statistically higher risk of diagnosis with a critical illness. Therefore, the older you are, the more expensive critical illness coverage will be for you. Because of this, many insurers set a minimum and maximum age (usually around 18 for minimum and 59 years old maximum) that you can take out critical illness coverage.
    • Health: There is a short medical questionnaire when applying for critical illness coverage. This is important to each company because in assessing the riskiness of insuring you, they want to know your medical history and the likelihood of you making a claim in the future based on your past and present medical issues. It is possible that your medical history could disqualify you for critical illness coverage or make your premium higher. That's why complete honesty is important when applying because if there is evidence in your medical records that disputes an answer from your questionnaire, the insurance company can void your policy entirely.
    • Lifestyle: In addition to answering medical questions, there will be an additional questionnaire regarding your lifestyle and habits. Are you a smoker? Do you work in a dangerous job or participate in extreme activities like skydiving? Do you exercise regularly? These questions, among others, are all factors in the risk assessment by the insurer. Critical illness coverage is higher for smokers because of the possibility of being diagnosed with respiratory-related diseases. As with your medical history, it is possible to be disqualified or charged with a higher monthly premium based on your lifestyle and habits.

    If you desire critical illness coverage, it is important to look at rates and quotes from different insurers before making a decision. Each company has a different risk assessment, so your monthly premium could vary with each insurer. If your medical history or lifestyle negatively impact your monthly premium and increase your cost, it is possible to try to bring down that monthly payment by either reducing the amount of coverage or shortening the term of coverage.

  • Should I purchase critical illness coverage? aaa

    Critical illness coverage can be a great asset to have if you are ever diagnosed with a critical illness. Having the lump sum payout from your insurer could provide the financial means necessary to help you and your family cover treatment costs, living expenses, or to do something you've always wanted to do, but not had the money to afford.

    While critical illness coverage is an additional cost to your life insurance policy, the reality is that you are statistically more likely to have a critical illness than you are to pass away during the term of your life insurance policy. This statistical likelihood is what makes critical illness coverage more expensive- insurance companies know they are more likely to have to payout on your claim with a critical illness than they are for death, so they charge more per month to you as the consumer. It is possible that some critical illness coverage could cost almost double a standard life insurance policy.

    It is important to note that if you are diagnosed with a critical illness, it has to fit within the severity and progression of the disease, as defined by your insurer. Each company has a different definition of critical illness, so it is worth comparing several insurers to understand the differences. Many insurers require a critical illness to be in an advanced stage before they will provide your financial benefit.

    Of course, there are alternative options to purchasing critical illness coverage. All Life Insurance policies include a terminal illness benefit and will pay out if you are given less than 21 months (1 year) to live by your doctor. If you have concerns about the additional cost of critical illness coverage, sticking with your standard life insurance policy that includes this terminal coverage, might be enough peace of mind for you.

    The additional cost of critical illness coverage is not to be taken lightly as remaining active on your payments each month is what keeps your coverage in place. Any failure to pay for your monthly premiums will result in the cancellation of your policy, without any refund. It's important to keep your current and possible future budget in mind when deciding if critical illness coverage is for you. When looking at rates, the prices for critical illness coverage will often be different for each company, but many different levels of critical illness coverage exist from company to company. Make sure to research what illnesses are covered and under what circumstances of severity and progression, as well as any extras the policy may offer. Affordable monthly premiums that work with your needs and the needs of your family are the most important things to remember.

  • What exactly will critical illness coverage do for me? aaa

    There are many illnesses and conditions which can be covered by a critical illness policy, as many as sixty, in fact. Each insurance company has their own list and definitions of critical, often associated with severity and advanced stages of the disease, so it's important to consider this. Not all conditions will be covered for a policy payout by all insurers.

    Most critical illness policies cover against the four most common illnesses/conditions: cancer, heart attack, stroke, and multiple sclerosis.

    Cancer

    Caused by abnormal cells within the body that are dividing uncontrollably, cancer cells can spread throughout the body quickly and form tumours which can have negative effects on a healthy body. With over one hundred types of cancer and advanced stages of the disease, there are many treatments available and often offer a high rate of success with aggressive, early treatment. According to Cancer Research, 1 in 3 individuals will be diagnosed with some form of cancer in our lifetime.

    There are exclusions to the cancer critical illness coverage. For example, most insurers require that the cancer be in an advanced stage of progression. Some cancers, like prostate (which is highly treatable), are often excluded from critical illness coverage or are only eligible for partial payout instead of full. Here are some other exclusions, as defined by the ABI (from website):

    • All cancers which are histologically classified as any of the following:
    • premalignant
    • non-invasive
    • cancer in situ
    • having either borderline malignancy
    • having low malignant potential
    • All tumours of the prostate unless histologically classified as having a Gleason score greater than 6 or having progressed to at least clinical TNM classification T2N0M0.
    • Chronic lymphocytic leukaemia unless histologically classified as having progressed to at least Binet Stage A.
    • Malignant melanoma unless it has been histologically classified as having caused invasion beyond the epidermis (outer layer of skin).
    • Any other skin cancer (including cutaneous lymphoma) unless it has been histologically classified as having caused invasion in the lymph glands or spread to distant organs.

    Heart attack

    A heart attack occurs when the heart or parts of it suffer from a lack of blood flow and oxygen, often caused by a blockage or obstruction in the arteries of the heart. This lack of blood flow restricts the function of the heart, causing tissue to suffer and die.

    Almost all critical illness policies will cover heart attacks. Death of heart muscle, due to inadequate blood supply, that has resulted in all of the following evidence of acute myocardial infarction:

    • New characteristic electrocardiographic changes.
    • The characteristic rise of cardiac enzymes or Troponins recorded at the following levels or higher:
    • Troponin T < 1.0 ng/ml
    • AccuTnl < 0.5 ng/ml or equivalent threshold with other Troponin I methods.
    • The evidence must show a definite acute myocardial infarction.

    There is an exclusion to this definition though, as other acute coronary issues like angina (but not limited to this) are not covered under critical illness policies.

    Stroke

    A stroke can occur quickly to anyone, with almost no previous symptoms or warning signs. A stroke occurs when the brain's blood supply is hampered, causing the decline, damage, and deadening of the brain cells. There is a high rate of recovery for strokes, though quite often some damage to the brain is done in ways that cannot be repaired. With such prevalence and lack of warning for this condition, almost all critical illness policies cover it.

    A stroke is defined as: "death of brain tissue due to inadequate blood supply or haemorrhage within the skull, resulting in permanent neurological deficit with persisting clinical symptoms."

    Multiple sclerosis

    Multiple sclerosis, also known as MS, is a condition of the central nervous system. It is frequently found more in women than men. Because the nervous system is considered central communication command for the human body, MS can affect muscle control, memory, vision, and memory.

    "a definite diagnosis of multiple sclerosis [must be made] by a consultant neurologist. There must be current clinical impairment of motor or sensory function caused by multiple sclerosis" [in order for a payout to occur]. Most critical illness policies meet this standard or exceed it.

    In addition to covering conditions and diseases, the critical illness policy may also cover additional health crises including: total and permanent disability, loss of ability to care for oneself, and intensive care hospitalisation. This will differ from each insurer and will depend on your policy and coverage. In addition, most critical illness policies will include partial payout options for a defined list of conditions or medical issues including, but not limited to: early stage breast cancer, prostate cancer, type 1 diabetes, or hospitalisation after an accident. This will differ from insurer to insurer.

Did you know ?

Becoming critically ill is not a pleasant experience for anyone. Knowing that you have an insurer on your side at a time of need makes all the difference. Our insurers care...

Factoid

Over 80% of Critical Illness Cover claims are for Cancer, Heart Attack, Stroke and Multiple Sclerosis