Critical Life Insurance – Types of Coverage
February 16, 2009 by MOYMJennifer
Filed under Insurance
Critical life insurance pays a tax-free lump-sum amount to the insured if he or she is diagnosed with a critical illness listed in his or her insurance policy and survives the said illness for a minimum period of 30 days. The critical illnesses covered depend on the type of coverage availed of by the policy holder.
Basic and Comprehensive Coverage
There are generally two types of coverage in critical life insurance plans – the basic and the comprehensive. The former covers only a limited number of critical illnesses. Heart attack, cancer, and stroke, the three most ordinary major medical conditions, are usually part of basic policies. The latter, on the other hand, covers a longer list of illnesses, including stroke, cancer, heart attack, and several more (e.g. 18 more) critical illnesses. This may include but is not limited to illnesses such as deafness, occupational HIV infection, coronary artery bypass surgery, major organ transplant, paralysis, late onset of diabetes, coma, multiple sclerosis, Parkinson’s disease, loss of speech, Alzheimer’s disease, kidney failure, blindness, severe burns, motor neuron disease, and benign brain tumors.
Ten-Year Renewable Term
A ten-year renewable plan can either be basic or comprehensive. It sets a specific premium rate for ten years. The insured has the option to renew his policy for another ten years after the initial period has passed. The rates, however, increase every time the policy holder renews his policy. He can continue with this renew-restructure premium rates process until the age of 75.
Level Term to Age 60, 65, 70 or 75
In this type of policy, the premium rates remain unchanged all throughout the policy’s life. Naturally, people are more prone to acquire critical illnesses at the later part of their life – say ages ranging from 65 onwards. Thus, the premiums for insuring people in the said ages are naturally more expensive than the premiums paid by younger people. Premiums in level terms up to age 75 are normally comparable to ten-year renewable terms but way lower when compared to permanent plans.
Permanent Plan or Level Term to Age 100
The premiums paid are level and in the bag up to age 100. The rates in this type of coverage are significantly more expensive as compared to level terms to age 75 since there is little likelihood that a claim will not be made.
The rates in any type of coverage also depend on whether the insured is a non-smoker or not. Naturally, rates for smokers are higher as the possibility of acquiring or developing a critical illness is higher for smokers than for non-smokers.
Benefits Provided
The benefits provided by a critical illness insurance do meet at some point regardless of the type of coverage availed of. For example, in any type of coverage, the insured still gets to decide on how he will use the money received from a valid claim. Once a claim is approved and the money is paid, the insurance provider has no say on how the insured spends the money; he can spend it on a holiday cruise, use it to pay off his mortgage, invest it, or leave it in trust for his family if he wants. Furthermore, critical life insurance policies also typically have provisions regarding refunds; generally, a policy holder can choose to refund all of his premium payments if he reaches 75 without making any claim.
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