Critical Life Insurance: What is Critical Life Insurance?

There are many types of insurance packages to choose from, not to mention the thousands of insurance companies that offer the same things – life, accident and disability insurance plans.  The common denominator among these insurance plans is that you (or your benefactors) only benefit once you’re dead or are permanently disabled.

An insurance policy that does something else entirely, however, has now been made available to the public.  This is critical life insurance, also known as critical illness insurance.  As the name suggests, this type of insurance pays a tax-free, lump-sum amount to the insured when he is diagnosed of any one of the critical illnesses covered by the policy.

Advantage Over Other Types of Insurance

The main advantage of the critical illness insurance is that you are given the chance to get back on track and become financially independent despite being diagnosed of a critical illness which, more or less, will require a huge amount of money in medical treatment.  Critical illness insurance, unlike disability insurance, does not require that you become incapable of working before you are paid a percentage of your monthly income.  It doesn’t pay your benefactors only after you die, unlike a life insurance policy; you can get the benefit while it can still do some good, like save your life or make your last days more comfortable.

The Need for a Critical Illness Insurance

Do you need critical illness insurance?  To find out, the first step is to sit down and make a list of all of your existing insurance policies.  Identify the benefits that are available to you through each of these policies.  Check also if there is one that already covers critical illnesses; perhaps your health insurance already has provisions in case you contract a critical illness?

Consider your financial capability as well.  How much more can you afford to pay for another insurance policy?  More importantly, how much will you need (and how much money will you have) in case you become seriously ill?

Before shopping around for a critical illness insurance policy, do a quick but thorough analysis of your own insurance needs and financial resources.  Factor in your monthly income, your dependents, everyday needs, and other financial obligations.  This way, before even looking around, you already have an idea of how much you can and cannot afford to shell out for critical illness insurance or – if you decide not take out one – how much you can afford to shell out for medical treatment if you become critically ill.

In general, younger and healthier people pay lower premiums.  This is of course the case for all other insurance policies in the market.  However, several factors, regardless of age, may affect the rate of premium that you need to pay.  These include the amount of coverage, the illnesses covered, and the insurance company’s own policies.  Medical records and medical histories may also be another factor.

Lump-Sum Payment

Typically, critical life insurance policies involve payment of a lump-sum amount that is equivalent to the cost of your coverage (i.e. the insurance policy’s face value).  This is also usually paid 30 days after a claim is approved.  Despite full recovery, furthermore, insured principals are not obliged to return the money received; once such amount is received, however, the policy ceases to exist.  In case of policies that mature without any claims, a portion of the premiums paid during the life of the policy is usually returned.  A person who is covered by a critical illness policy who dies without making a claim due to the non-inclusion of his illness, furthermore, may still recover a portion of his benefits; premium payments may be paid back to the insured’s benefactors, for instance.