What’s the difference between Health, Life and Critical Illness Insurance?
Health insurance covers the costs of medical treatment and medication, to varying limits and exclusions, according to the package. With traditional life insurance, “term” insurance covers you for a fixed term, after which point the policy expires. “Whole-of-life” typically covers you until death.
Critical illness cover is an insurance product in which the insurer is contracted to make a lump sum tax-free cash payment if the policyholder is diagnosed with an illnesses specified on a predetermined list.
The policy may also be structured to pay out regular income upon the critical illness event. The payout may also be upon the policyholder undergoing a surgical procedure, for example, having a heart bypass operation. Generally these policies are used to cover a potential loss of earnings from being unable to work for a prolonged period of time. Similarly, total permanent disability insurance would cover you in the event that you became unable to perform your employment function due to a disability, such as irrecoverable injury sustained in an accident.
Why would I need Critical Illness Cover?
According to a 2018 survey reported in Gulf News, the average age of a critical illness claimant in the region is 48 and 80% of claimants are below 60 – very much in their prime working (and therefore earning) years. Many people at this age have a family to support, with children either in school or university, a mortgage and other household debts and expenses. If this describes your life, how long could your family bear the costs without your income?
And thanks to medical advances, people are living longer even if they have suffered a critical illness, meaning you could need to supplement living expenses for a long time. You can spend the insurance payout how you wish, so you could use it to clear any debts, pay for medical bills, adapt your home to your particular medical needs, or make investments to provide a revenue stream. In other words, it can offer a financial lifeline in a time of crisis.
How do I go about arranging Critical Illness Cover?
A common rule of thumb for critical illness cover is 5-7 years of your annual income. However, it’s a good idea to sit down with a financial adviser and calculate how much coverage you may need versus how much premium is affordable, and how the critical illness cover fits into the rest of your portfolio.
Many life insurance policies give you the option to include critical illness cover as an extra. You can increase and decrease the value, to see how this affects your life insurance premiums. Critical illness cover is also usually cheaper if you buy it alongside life insurance. In fact, some insurers don’t even sell standalone critical illness cover. But remember that there’s normally only one payout. So, if you claim for a critical illness, you would not receive a further payout on death. Contact us to find out more about critical illness cover, and to get advice from one of our advisers on which products are the most suitable for your circumstances.