Health Insurance Articles

Critical Illness Policy: What Is It And When Do You Purchase One

2009-12-24

While there is a growing familiarity with insurance concepts such as term, universal and death benefit insurance, the concept of critical illness insurance is still not widely understood. Introduced over two decades ago, a critical illness policy provides a lump sum payment to the client in the event they are diagnosed with an illness included on a pre-defined list of critical illnesses.

Critical illness insurance is a form of health insurance that is not typically covered by an employer's health care plan. This form of coverage has only proven itself necessary in the recent past, as medical advances have made it possible for human beings to recover from all but the most deadly of maladies. A critical illness policy can often be attached to a universal or term life insurance policy, and usually at a fixed premium. The premiums are typically smaller for younger, healthier individuals. Important things to note about critical illness insurance are that there is often a waiting period before the lump sum payment is paid out, and that a recovery from the illness does not void the policy.

The waiting period for the funds can be up to 30 days, and once disbursed, can be used for any costs incurred by the policyholder, including mortgage payments, utility bills and groceries. Additionally, the processing of payment is begun as soon as it can be confirmed that the client does suffer from a critical illness that is covered by the health insurance policy. Even if the client recovers fully from their illness, they are still entitled to the lump sum payment. However, if they succumb to the illness before the payment is granted, the lump sum will not be paid. It is possible to recover some or all of the premiums, but a payment in that case would be covered under a death policy, not critical insurance coverage.

While certain jobs or lifestyles will lend themselves to a higher risk of critical illness, it is impossible to pinpoint if an illness of this type will strike. As mentioned, the health insurance coverage provided by many employers does not cover their employees, in full or in part, for a critical illness. Additionally, critical illness benefits cannot be applied for after a diagnosis has been made, so the decision to purchase such coverage must be made before any condition is diagnosed. The key is to determine what the effect would be if a member of the family suffered a critical illness for any lengthy period of time, and what kind of drain that would have financially. A critical illness policy can be an excellent way to help guarantee monetary stability in what would be an already difficult time.