Life Term Insurance can be taken out with the option of being a Life Critical Illness cover policy. This means that it is possible that a claim can be made on the policy for an occurrence other than just the death of a life assured.
Critical Illness cover in short is insurance against the life insured being diagnosed with one of a number of Critical Illnesses named by the insurer. As on death a pre-determined lump sum is paid out but this time in the event that one of the specified Critical Illnesses is diagnosed.
Insurer do not list exactly the same Critical Illnesses and it is vital to check exactly which illness is covered before you take out a policy.
There are two types of Critical Illness cover and this is integrated Life Critical Illness Cover and stand alone Critical Illness cover.
Integrated Critical Illness cover is as simple as a Life Term Insurance Policy which has a single sum assured for both Life and Critical Illness cover. For example a single sum assured of $40,000 which will be paid upon the first occurrence of the death of a life assured or the diagnosis of one of the named Critical Illnesses. This is simply a Life Critical Illness policy and once a claim is made the policy is finished.
Alternatively some insurers will offer the option of stand alone Critical Illness cover. Stand alone Critical Illness cover can be for instance a Life Term Insurance Policy with a sum assured of $40,000 on death and $35,000 in the event of being diagnosed with a Critical Illness, so in theory the contract is 2 policies in one as there are two separate sum assureds.
There is a variation to stand alone Critical Illness cover which is where there is no Life cover and the policy is designed specifically to pay out in the event of one of the named Critical Illnesses being diagnosed.
On a Life Critical Illness cover application there will be additional questions asked by the insurer specifically for this additional option.
Life Critical Illness cover can be quite a complex contract and it is always best to read the company's literature on the policy before committing to any cover as this will explain any possible restrictions and their specific terms and conditions. All such literature is always available directly from insurer's websites.
Why take out Life Critical Illness Cover?
If you are diagnosed with a Critical Illness then it is probable that your lifestyle will change for good. Upon diagnosis you may not be able to look after yourself in the same way if, at all, in the future. Life Critical Illness Cover not only provides valuable Life Insurance but also provides financial help should you need to adapt to a change of lifestyle due to a Critical Illness.
The benefits of Life Critical Illness cover is that you can afford to pay for the following:
- Private Medical Treatment
- Alterations to your home if they are needed in order to cope with your change of lifestyle, such as a stair lift
- The purchase of medical equipment that may be specific to your illness, this could include a kidney dialysis machine
- To repay your mortgage in full as you will likely be unable to go out to work and continue to earn
- Home care
Is there a separate Critical Illness Premium?
You will only be charged one Life Insurance Premium per policy but on any quotation that you receive you will see that the Critical Illness Premium is shown as a portion of the total premium. Obviously having Critical Illness cover with your policy will make for a higher premium because of the added benefit.
It is possible that the insurer will offer the option of having a 'Guaranteed Critical Illness Premium' or a 'Reviewable Critical Illness Premium'. The Guaranteed Critical Illness Premium is just that and will remain the same throughout the term of the policy. The Reviewable Critical Illness Premium will mean that periodically, for example every 5 years, the premium will be reviewed and following the review you could be offered a revised premium. The rates at the time of the review are the deciding factor and naturally this could mean a higher or lower premium.
As with a regular Life Term Insurance Policy, cover will only remain in place as long as you keep up to date with your Life Critical Illness cover premiums. The plan will at no time accumulate any value.
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