What is Critical illness Insurance?

Critical Illness Insurance is a form of insurance that pays out a lump sum if you are diagnosed with a serious illness. The insurance company always provides a list of illnesses which it defines as “critical illnesses”. You will find this list within the booklet you get with your application form. A typical list of such illnesses is shown below.

The crucial point with a “Critical Illness” is that you may survive with the illness for very many years. During that time your earning power may well be nil or only a fraction of what it was previously. Unless you can find a way of coping with a big drop in income and possibly an increase in your living expenses, then the financial effects on your family could be disastrous.
You may think that “it won’t happen to me” and we sincerely hope that it doesn’t, but consider the following facts: -

· 35% of men and 46% of women who develop cancer survive at least 5 years
· 78% of stroke victims survive more than a year.
· 1 in 5 men suffer a critical illness before their normal retirement age.
· 1 in 6 women suffer a critical illness before their normal retirement age.

Now are you so sure that it couldn’t happen to you? Could you cope with the financial effects of such illness? Critical Illness Insurance is the way to insure yourself against the financial consequences of such a possibility.

Just a word of caution. Critical Illness Insurance is not the same as Terminal Illness insurance. First of all Terminal Illness is free on all good the life insurance policies whereas Critical Illness cover is always extra.

The essential difference between Critical Illness and Terminal Illness is that Critical Illness pays out immediately you are diagnosed with a serious illness.* On the other hand, Terminal Illness Insurance only pays out if you are expected to die from an illness within 12 months of diagnosis. (*The insurance company will only pay out if the critical illness is included within your policy’s defined list of critical illnesses.)

Now consider again the fact that 35% of men and 46% of women who develop cancer will survive at least 5 years and that 78% of stroke victims will survive at least a year. We hope you will now appreciate the merits of Critical Illness Insurance.

What illnesses are is classified as Critical Illnesses?

Some Insurance Companies offer two alternative two levels of Critical Illness cover; Standard Cover (sometimes known as 'Basic Cover') and Comprehensive Critical Illness Cover.

Standard Critical Illness Cover covers illnesses from which the policyholder can be expected, eventually, to die.
Comprehensive Critical Illness Cover includes a wider list to include serious conditions that might not necessarily be terminal but which would certainly prevent you from working normally.

The types of critical illness included within Comprehensive Critical Illness Cover do vary between insurance companies but typically they will include the following: -

Alzheimer’s disease
Angioplasty
Aorta graft surgery
Aplastic anemia
Bacterial Meningitis
Benign brain tumour
Blindness
Cancer
Coma
Coronary artery by-pass surgery
Creutzfeldt-Jakob disease
Deafness
Dementia
Heart attack
Heart valve replacement or repair
HIV or AIDs from an assault, blood transfusion, occupational duties or accident
Keyhole heart surgery
Kidney failure
Loss of independent existence
Loss of limbs
Loss of speech
Major organ transplant
Motor Neurone disease
Multiple Sclerosis
Paralysis/Paraplegia
Parkinson’s disease
Stroke
Third degree burns
Total permanent disability
Cover for children

What does the “survival period” mean?

You should be aware that you have to survive for a minimum number of days in order to claim under Critical Illness insurance. It is normally 28 days following diagnosis of a critical illness but we are aware that some Insurance Companies have reduced this to 14 days. Please check your proposed policy. The essential point is that if you die within the survival period you cannot claim.

Employment Cover

When you buy Critical Illness Insurance you need to decide what type of “employment cover” you require. Before the Insurance Company will pay out, they will want to know that the illness prevents you from working. The issue is what type of work does the illness prevent you from following?
To make things a little complicated, you could come across four alternative definitions which define “out of work”: -

· Critical Illness that prevents you from continuing your own existing occupation.
· Critical Illness that prevents you from following any occupation.
· Critical Illness that prevents you from following any employment to which you are suited.
· A less common alternative is called “Work Tasks and Life tasks”. Basically the insurance company lists six “work tasks” (such as walking and talking) and six “life tasks” (such as washing and feeding). If you are unable to undertake any two tasks from the “work tasks” or any three from the “life tasks” your illness qualifies for a claim.

The adviser from MoneyQuest will help you decide which is best.

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