Known also as critical illness insurance, this coverage is a long-term insurance policy. Generally, you get a ‘lump sum’ of money all in one payment and tax free. These types of policies are generally designed to pay off your mortgage and debts if you get extremely ill. This can also be used if you choose alternative treatment or treatment immediately in the USA.

What does it cover?

Critical illness insurance policies generally list the illnesses that they’ll cover. There’s a basic coverage plan of the top 4, but most companies cover up to 25 illnesses. If you’re permanently disabled due to injury or illness most of them will pay but you just get one pay out once the policy ends and that’s it.

Here are some examples of a critical illness:

  • Multiple sclerosis and similar conditions.
  • Heart Attack
  • Certain stages of Cancer
  • Stroke

What’s not covered?

There are some serious conditions that don’t get covered by a critical illness policies, such as some cancers or chronic conditions. This type of policy doesn’t pay out upon your death unless purchase a Return of Premium on Death rider or you combine life insurance with it. So always find out exactly what type of policy you’re purchasing because there are different types.

How do you make a claim?

Well if you’re young, active, fit with good medical history and healthy lifestyle habits, the likelihood of you getting sick enough to need such a policy is slim. The older you are the more susceptible you are to illnesses but what happens is that the payments you make are higher and existing conditions don’t get covered.

Alternatives

If it’s not just you and you have a family, life insurance would be the most important coverage to you. The thing about that is it only gets paid out if you’re diagnosed with a terminal illness or if you die. Income protection insurance, also known as Disability Insurance is also a suitable, less costly option, for cases where you have a critical illness that isn’t covered in the policy and you can’t work.