Critical illness insurance pays a tax-free lump sum benefit upon the diagnosis of a critical illness after the survival period has been satisfied. In most cases, the survival period is 30 days. A basic policy typically covers heart attacks, life-threatening cancer, and strokes. You can also add coverage for other conditions or illnesses, including Alzheimer’s disease, loss of independent existence or multiple sclerosis, to name a few. Some companies also offer critical illness coverage for children to cover childhood-related critical conditions such as cystic fibrosis or cerebral palsy.
When choosing a policy, you should consider the purpose of the coverage. Many people will use their lump sum benefit to pay off a mortgage or other debts, while others will choose to use it to replace income for a spouse who may need to take time away from work to act as a caregiver. Some may use it to help pay for medication that is not covered by healthcare or to seek out of country coverage or expertise. Determining your purpose for purchasing critical illness insurance will help define the type and amount of coverage that fits your needs.
There are plans that will provide coverage over your entire lifetime, while others have a maximum age of 65 or 75, and the benefit amount can range anywhere from $10,000 to over $1,000,000. There are other benefit options that can also be added to a policy, such as the return of premium, which refunds your premium payments after a certain period upon the cancelation or expiry of a policy, provided no claims were made.
Critical Illness insurance can play an important role in your overall insurance plan and complement other coverage that you may already have or be considering such as disability, long term care and life insurance.