Critical illness insurance or major illness cover is an insurance policy that will pay a lump sum cash payment if the policyholder is diagnosed with one of the major medical conditions listed in the insurance policy. It is usually contracted to provide sufficient funds to help policyholder adjusting its lifestyle to the new health situation. A critical illness plan covers the high cost of treatment for critical illnesses and allows the policyholder to remain financially stable during this time.
The list of covered illnesses varies with each insurer and it can include up to 60 medical conditions.
Examples of conditions that might be covered include:
Benign brain tumor
Coronary artery bypass surgery
Heart valve replacement
Loss of independent existence
Loss of limbs
Loss of speech
Major organ transplant
Major organ failure on the waiting list
Motor neuron disease
Occupational HIV infection
Stroke (Cerebrovascular accident)
Is critical illness insurance similar to disability income protection insurance?
Disability income insurance is meant to cover your loss of salary following a critical illness. Though the length of this payment is much longer (up to retirement age for permanent disability) and coverage, usually up to 70% of monthly salary, the payout will depend on the duration of the policy holder’s inability to work.
The key difference between both plans is that disability income protection will stop the day you rejoin work and start earning money. After this, you will need to provide ongoing proof of loss of income.
Critical illness insurance will pay a lump sum during the diagnosis of the medical condition. Therefore, the fact that you still have an income despite your medical condition, or that you are fully recovered, will not affect the payout.
How much does it cost?
Cost of critical illness depends on many factors but main ones will be your age and health situation at the time of contract signature: insurer is taking a long term risk on your health situation, so the healthier and younger you are at time of signature and the cheaper the plan will be in the long term.