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Critical illness insurance provides you with a lump sum benefit when you’re unable to work due to a listed condition. These conditions vary between insurers, but may include:
Your insurer won’t pay a benefit if you suffer from a condition that isn’t specified on your policy. For a full list of covered illnesses, read your policy documents and exclusions.
Critical illness insurance is a policy that pays a lump sum in case of serious illness so that you can concentrate on recovery instead of finances. Common features include:
Premiums paid are not tax-deductible, however the benefits paid from the claim are tax-free.
Your insurer will pay out the benefit if you meet these requirements:
There are no guidelines to govern how you can use the payout from a critical illness insurance policy. You might use it to cover your mortgage payments or medical expenses, repay your debt, or pay for rehabilitation.
Some of the common reasons why a claim wouldn’t be paid out include:
Consult the terms and conditions for your plan for a full list of circumstances, but be aware that your policy will end if:
Life insurance and critical illness insurance work differently, and many people use both to make sure they and their family are fully protected. You can purchase policies separately or bundle them together to save money.
Life insurance | Critical illness insurance | |
---|---|---|
Definition | An insurance policy that pays out when someone dies. If the policyholder has an accelerated death benefit rider, they may be able to access part of the death benefit early if they’re diagnosed with a terminal or chronic illness. | An insurance policy that pays out when someone is diagnosed with a serious illness that isn’t terminal |
Who gets paid? | The policyholder’s named beneficiary | The policyholder |
When do they get paid? | After showing proof of a terminal illness, chronic illness or a death certificate | After being diagnosed with a serious illness |
What is the money used for? | Final expenses, debts, supporting children and providing for loved ones | Replacing lost income, nursing care, home modifications for disabilities and medical copays |
In the event of serious illness or injury, critical illness insurance pays out a lump sum that can be used to pay debts or medical bills, make home modifications or be used as an income.
A disability policy replaces a portion of your paycheck if you become ill or injured and can’t return to work. The money can be used for expenses or as an income.
Critical illness insurance is important to consider for multiple reasons. It can help you cover the costs of bills, childcare, groceries and other expenses like mortgage payments or rehabilitation while you’re incapacitated. It can also protect your assets and allow you to continue with your way of living if you’re ill and unable to work.
If you also want to leave your loved ones money when you pass away, compare life insurance companies.
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