Critical Life Insurance – What Does Critical Life Insurance Cover?

Critical life insurance or critical illness insurance is a type of insurance that pays a lump-sum amount to the insured in case he is diagnosed to have a covered critical illness.  This gives rise to the question:  what is typically considered to be a critical illness?  Do all insurance companies look at certain illnesses the same way, or is one sickness considered critical by Insurance Company A but normal by Insurance Company B?

Coverage

The conditions that are considered to be critical illnesses vary from one insurance provider to another and from one policy to another.  Nevertheless, the list of illnesses that are commonly considered critical and are often found in critical life insurance policies include heart attack, cancer, blindness, stroke, multiple sclerosis, Alzheimer’s disease, kidney or renal failure, major organ transplants, paralysis, coronary artery bypass graft, deafness, Parkinson’s disease, and occupational HIV injury.

Typical Terms and Rules

Just like any other type of insurance, critical illness insurance policies have their own rules and terms that must be fulfilled and followed.  In other words, there are conditions attached to such insurance policies.  The following are some of the most common:

1.  For the insured to get his claim, the insurer requires that the insured survive the illness for the duration of the waiting period.  If he dies before the 30-day requirement, his family will be entitled to receive only a refund of all the premiums paid and not the lump-sum amount stated in the policy.

2.  Most pre-conditions, meaning existing illnesses that were diagnosed before the insured signs up for the insurer’s product, are not covered by the insurance unless otherwise stated in the policy.

3.  In case the insured is diagnosed of a critical illness within 90 days upon the issuance of the policy, the insured cannot make a claim and will instead be reimbursed the total amount of premiums paid.  Insurance companies do not want to create the impression that they tolerate people who avail of critical illness insurance once they feel that they are critically ill.  By establishing a reputation for being strict, they are able to deter fraud.

4.  There are also insurers who require either a 90-day or 180-day waiting period in cases of the insured’s paralysis.

5.  Once a claim has been successfully made and paid, the insurance ceases to exist.

6.  A person who is diagnosed of a critical illness is not automatically eligible to make a claim.  The degree of severity is also taken into consideration.  The claim of someone who has been diagnosed for a type of cancer that can be treated and that does not result in major financial discomfort can be deemed invalid.

Tips

The inclusion, extent and degree of coverage of a critical illness insurance policy vary from one company to another and from one type of policy to the next.  It is therefore important to compare the benefits and costs of the policies being considered and ensure that the critical illnesses that you think you are most likely to get are included in the list of covered illnesses.  It may also help to seek the help of an insurance advisor who can explain to you the terms and conditions of and the terminologies used in the policy.