|Critical Illness Coverage:
What You Need to Know
It’s becoming increasingly common for US consumers to have some form of critical illness coverage as part of their insurance portfolio. Unlike standard life insurance policies that will only pay out if you die, critical illness policies will pay out if you are diagnosed with a specific life-threatening illness or medical condition.
So, for example, if you have critical illness insurance and you are diagnosed with cancer, then your critical illness coverage will pay out the pre-agreed sum on your diagnosis. The money you get under the terms of your critical illness coverage will be yours to keep whether you survive your illness or not. So, what kinds of critical illness policies are available?
Types of critical illness plans
There are various ways that you can take out this kind of critical illness insurance policy. You can, for example:
- Buy critical illness with an insurance policy.
- Buy critical illness with another form of protection policy such as a mortgage protection plan.
- Buy critical illness as a stand-alone product.
In general terms, you will agree a sum to be insured for a certain period of time (i.e. for a number of years). This is the sum that will be paid out if you qualify to claim on the policy. Premium payments are usually made on a monthly basis; the higher the sum you insure yourself for, the higher your premium payments will be.
Some insurers will offer you the option of choosing from two different types of coverage: basic coverage for primary critical illnesses and comprehensive coverage for a broader list.
Critical illness insurance tips
Not all critical illness coverage will cover exactly the same illness and conditions. The majority of serious medical issues will be covered by most policies, but some insurers will cover some other illnesses while others won’t. So, be sure to read and compare the illnesses/conditions that are applicable to make sure that you get comprehensive critical illness coverage.
Illnesses/medical conditions that are not covered by critical illness policies are often known as ‘exclusions’. These can typically include:
- Certain types of illness/conditions: Some critical illness policies won’t give coverage for ‘minor’ types of cancer, for cancer in a pre-malignant stage or for illnesses/conditions that do not have permanent symptoms. Look for policies that will reverse this decision if the illness/condition worsens as time goes by.
- Changes to lifestyle/non-disclosure: Many critical illness insurance policies won’t pay out if you fail to tell the insurer all the information that it asks for truthfully when you make an application. This may also apply if you have a significant lifestyle change after your application has been approved and you don’t tell them about it. So, for example, if you smoke (but say that you don’t) when you apply, and the insurer finds out when you make a claim, then you won’t necessarily get your payout. Or, if you start smoking after taking out your policy and don’t tell your insurer, then this could also invalidate your claim.
- Death: You need to survive for a certain number of days after your critical illness has been diagnosed before many insurers will make a payment.
- Hazardous sports/occupations: Most policies will not cover you if your illness/condition comes about as a result of taking part in a hazardous sport or occupation.
- Due care: If you ignore medical advice and do not take ‘due care’ then you may invalidate your claim.
- Pre-existing/hereditary medical conditions: If you have already suffered from a specific medical condition, then this may be excluded from your critical illness coverage. If your family has a hereditary condition or a tendency towards developing a type of critical illness, then some policies will charge more for coverage (as you will be a higher risk) or, again, may not give you coverage for the specific illness.
People buy critical illness insurance for different reasons. Some simply want to have access to some money through critical illness coverage to help them out if they become this ill. Others will take out critical illness coverage to repay the mortgage or will use critical illness policies to give their family a financial helping hand at a difficult time.
The key thing to remember when you are looking at critical illness insurance is to make sure that you get the best critical illness coverage at the most reasonable cost. So, shop around for critical illness coverage and make sure to compare quotes for the critical illness coverage policies in which you are interested. This will go some way to helping you cut costs.
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