What is critical illness insurance?

Critical illness insurance, known as critical illness cover or a dread disease policy. It is an insurance product in which the insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the specific illnesses on a predetermined list as part of an insurance policy.

Why you should buy critical illness plan?

Critical Illness (CI) insurance will pay you a tax-free lump sum of cash if you are diagnosed with a serious illness. You can choose which illnesses are covered and in some cases, you might be allowed to choose regular payments instead of a lump sum. This money can be used for anything you like.

The policy may require you to survive a certain length of time from when the illness was first diagnosed. Other terms and conditions may also apply, so read the contract carefully to ensure you understand your coverage.

• Receive cash back: After a specified amount of time, you may be eligible to have a portion of your premiums returned. Certain conditions apply and vary between companies, but generally, if you don’t make a claim and don’t think you will, you can cancel your policy and receive a percentage of the premiums you have paid over the years.
• Tax free lump sum payment: When you make a claim, you are paid a tax free, lump sum in the amount of your coverage. Some policies will allow you to receive instalments. The money is tax exempt if premiums were paid with after-tax dollars, which is usually the case with a policy you own by yourself. If you have a group plan with your employer, your benefits may be taxable because the premiums were paid before taxes were deducted from your pay.
• One less worry: With Critical Illness coverage, you have one less thing to worry about. You are allowed to take the time you need to recover without worrying about daily expenses or the additional costs of medical services not covered by your provincial health plan. The insurance company doesn’t stipulate how the money can be used, so you can use it in any way you like.
• Additional coverage: Critical Illness coverage provides you with the extra protection you don’t get from other types of policies. With most policies, you are buying protection and peace of mind for your beneficiaries. Critical Illness insurance helps you in case a serious illness prevents you from working. You can buy a policy that will only make your mortgage payments, however, these types won’t help with your other bills and usually only cover you in case of heart attack, stroke or cancer. A Critical Illness policy will cover these as well as 22 other common conditions.
• Peace of mind: A Critical Illness policy gives you peace of mind. You never want to think something will happen, but if it does, you can rest assured your bills will be covered even if you have to be off work for several months or even a year. You might never be able to return to work. The policy is underwritten during the application process, so you know right away if you have been approved or not. This means no surprises at claim time
• Coverage for children: Its sad but true, children can also develop a serious illness. When this happens, you will want to take time off work to be with your child or hire someone to help with the extra care the child needs. Critical Illness coverage can be purchased for children to help with the loss of your income or extra expenses incurred. Some insurance providers will cover people from only 30 days old and allow you to insure your child for up to five illnesses. Adults can be covered for about 25 illnesses. Policies, terms and conditions vary from one company to another and change when the child turns 18.

Differences between Critical Illness & Health Insurance?

Critical illness is a policy to covel life threatening diseases like tumor, permanent paralysis, etc. Where as health insurance is a comprehensive cover that includes hospitalization expenses.