Is Critical illness insurance worth it?
Although we know we will all pass away one day, most of us don’t think about what will happen if we become critically ill. Either we don’t like to think about it or we think it’s something that will happen to other people, not to us. However, it is something that can happen to anyone and the consequences can be devastating. Not only the illness itself but also how we pay the bills or care for our families.
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What is critical illness cover?
Critical illness cover is an extra form of protection that pays out a tax-free lump sum if you are diagnosed with an illness or serious medical condition. This is not the same as regular life insurance, which is designed to pay out money when you die. You can take out the cover as well as your life insurance or instead of it.
There is also the option of children’s critical illness cover, which is not a stand-alone product but an add-on to your insurance. The reason for this is that you would be making the claim on behalf of your child.
Learn more about CRITICAL ILLNESS COVER.
Who needs critical illness cover?
A critical illness can happen to anyone, but is it worth having critical illness cover? No matter what your age is, what lifestyle you have, or your family medical history; everyone is at some risk of being affected by a severe illness.
An incident like this can disrupt your life but if you have prepared beforehand with a financial cushion, it can alleviate some of the stress. This is especially true if you don’t have a substantial amount of savings to draw upon in an emergency.
How does it work?
If you are diagnosed with an illness or serious medical condition that is listed in the policy, you will get a tax-free lump sum. Unlike regular life insurance, this money will come directly to you. This is not the same as terminal illness cover, which is often included in basic life insurance and refers to illnesses where you are diagnosed to pass away within 12 months.
The money can be used towards anything you wish. Many people use it for their mortgage, rent, living expenses or household bills. It is there to ease the financial burden that can come from a devastating event, so it’s easy to see how critical illness cover can give you peace of mind.
Each insurance company that offers critical illness cover will have a list of medical conditions which will qualify you for a payout if you get diagnosed with any of them. The list of conditions varies from insurer to insurer, but all of them will cover you for a wide range of illnesses and many also cover permanent disabilities as well.
More about TERMINAL ILLNESS BENEFIT.
Which type of critical illness cover should I get?
There are two main types of critical illness cover:
- Combined critical illness cover– This type of insurance will pay out a lump sum only once. If you are diagnosed with a critical illness within the term, you will get a pay-out. This means you will no longer be covered and if you die later on within the term, your beneficiaries won’t receive anything.
- Additional critical illness cover – This is a more expensive type of critical illness cover. As with the previous cover, you will get a pay-out if you are diagnosed with a critical illness or disability. However, the insurer will also pay out a lump sum if you die within the term as well.
What illnesses are covered by critical illness cover?
This varies between insurers but first, we need to define what we mean by: “critical illness.” Insurers generally define this as an illness that causes long-term and serious damage. Exactly what illness is covered will depend on the policy and it is important to read through it carefully before you buy so you know exactly what you are covered for.
Common examples of illnesses covered include:
- Heart attack
- Loss of limb
- HIV
- Blindness
- Stroke
- Brain injury
- Most types of Cancer
- Multiple sclerosis
Whether you get a pay-out also depends on how severe or permanent the condition is, even if it is one that appears in the policy. A mild heart attack or stroke may be excluded if it isn’t severe enough to qualify, for example. This is the same for some forms of cancer if they are known to be easily treatable.
There are, however, exceptions to this. Some policies will pay out a small amount if you are diagnosed with a non-critical illness and still allow you to be covered. It is best to discuss with your insurer before you buy to see if this is part of the policy.
How much does critical illness cover cost?
There isn’t an average cost for critical illness cover as the amount you pay will depend on a number of factors, such as; your age, your medical history, and your lifestyle. The price, as with most life insurance, will increase the older you get so it is a good idea to start looking early, even if you think you are at low risk of contracting a critical illness.
You might want to think about quitting smoking or making healthier life choices at least 12 months before making your application. This has a good chance of making your premiums (the money you pay) more affordable.
In addition, any pre existing medical conditions may mean paying a higher premium, or an exclusion being applied to your policy for anything related.
It is important to pick a plan you can afford as if you stop paying premiums before the term ends, you will not be covered and you will not receive any money back. The term will simply come to an end.
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