Critical illness Insurance

A critical illness insurance plan is an insurance policy that pays cash benefits to the policyholder if they are diagnosed with a medical condition listed in the policy during the policy term. Also called catastrophic illness insurance, it covers very serious conditions such as stroke, cancer, loss of arms or legs, and more.

Critical illness Insurance

Unlike other types of insurance, such as health insurance, critical illness insurance pays out a lump-sum benefit upon diagnosis, which can be used to cover medical expenses, everyday living costs, or any other expenses you may have. This type of insurance can offer peace of mind knowing that you have a financial safety net in place during a challenging time, allowing you to focus on your recovery.

Which Condition Does It Cover?

Just so you know, the illnesses covered by this policy vary between insurance companies. Four main conditions are coronary artery bypass surgery, heart attack, cancer, and stroke. Below are some of the medical conditions that may be covered by the policy:

  • Coronary bypass surgery
  • Alzheimer’s disease
  • Aortic surgery
  • A benign brain tumor
  • Blindness
  • Cancer (life-threatening)
  • Coma
  • Coronary artery bypass surgery
  • Deafness
  • Loss of speech
  • Aplastic anemia
  • Bacterial meningitis
  • Major organ transplant
  • Major organ failure is on the waiting list.
  • Motor neuron disease
  • Multiple sclerosis
  • Occupational HIV infection
  • Paralysis
  • Parkinson’s disease
  • Severe burns
  • Heart attack
  • Heart valve replacement
  • Kidney failure
  • Loss of independent existence
  • Loss of limbs

Many policies cover permanent disabilities caused by injury or illness. Some may offer smaller payments for less severe conditions or if your child is affected. However, not all conditions are covered. Exclusions often include non-invasive cancers, high blood pressure, and certain injuries like broken bones. Policies also specify the severity of the condition needed to qualify for a payout.

How does critical illness insurance work?

A critical illness policy offers financial protection if you’re diagnosed with a major illness or medical condition. Unlike regular health insurance, which pays for medical expenses, critical illness insurance gives you a lump-sum payment when you’re diagnosed with a covered illness. This payment can be used however you need, whether for medical costs, taking time off work, or covering other expenses like mortgage or rent payments. However, it’s important to note that pre-existing conditions aren’t covered, so you need to get coverage before you get sick.

When do I need it?

Consider getting critical illness coverage if you heavily rely on your income to support your family, lack sufficient savings to cover expenses during serious illness or disability, or don’t have benefits from your job to cover extended time off due to sickness.

You might not need it if you have enough savings to handle ongoing expenses, no financial obligations like a mortgage or dependents, a partner who can cover living costs, or if you already have coverage through your employer’s benefits. You should also consider getting an insurance plan if your family has a history of serious conditions like heart disease.

How much does Critical Illness Insurance Cost?

The cost of a critical illness policy depends on various factors like age, gender, tobacco use, the insurance company, and the specific benefits of the policy. Generally, the older you are and the more comprehensive the coverage, the higher the monthly cost.

For example, someone in their 20s might pay a few dollars a month for basic coverage and under $50 for robust coverage. However, someone in their late 50s might find that $50 only covers minimal basic coverage.

How does it differ from regular health insurance?

One of the benefits of this policy is its flexibility in terms of how you can make use of the payout. Unlike the traditional health insurance plan that helps pay for medical bills, this policy gives you total freedom to use the money however you want. This means you can use the fund to pay for treatments that are not covered by the medical plan. You also use it for other out-of-pocket expenses that may occur during your illness.

It’s key to remember that critical illness insurance is extra coverage, not a replacement for your main medical insurance. Instead, it works alongside it, giving you extra financial protection if you’re diagnosed with certain serious illnesses. Having both kinds of coverage means you’re better prepared for the unexpected and will have more support if you face a major health challenge.

How much critical illness coverage do I need?

This policy is typically taken out with other types of insurance, such as income protection or life insurance. It is mostly combined with the life insurance policy. And the amount of coverage you need will depend on work benefits, debts, dependents, mortgages, rent payments, work benefits, or other insurance products that you have. You can adjust the amount of coverage you take out according to your monthly payments and needs.

Where can I purchase it?

If your job doesn’t offer critical illness insurance, you’ll need to look elsewhere for coverage. These plans aren’t typically found on the Marketplace, so you’ll have to approach insurance companies directly or consider adding them to a life insurance policy. When choosing a plan, it’s crucial to carefully read the details, like coverage limits and exclusions.

Comparing quotes from different providers can help you find the best coverage for your budget. For personalized advice, consider consulting a financial advisor or broker who can guide you through the options. They may charge a fee or receive commissions from insurance companies. If you’ve been denied coverage before due to a medical condition, some specialized brokers and insurers can help.

Is critical illness insurance worth it?

Whether you need critical illness insurance depends on your situation. If you already have strong health and disability coverage and enough savings to handle medical bills and other expenses during a critical illness, you might not require additional protection. However, if your health plan has high out-of-pocket costs or if the non-medical expenses of a serious illness would be hard to manage, a critical illness policy could be a valuable addition to your coverage.