When you are critically ill, the last thing you want to be worrying about is whether your home will be repossessed or your how your family will make ends meet. This is where critical illness insurance coverage comes in. It is a policy designed pay out a guaranteed lump sum of money if the policy holder becomes critically ill and is unable to provide for his dependents or service his debt obligations, such as a mortgage.
Although the definition of what constitutes a critical illness varies from company to company, generally they include such illnesses as: heart attacks, cancer, paralysis and stroke. Each insurance company will have a list of illnesses that it covers under its critical illness cover and it is important to review these when comparing policies. The critical illness coverage will come into effect when you are diagnosed with one of the illnesses listed in the policy or go into treatment or surgery for one of the illnesses.
It is important to keep in mind that most critical illness policies will not cover conditions brought on by alcohol and drug abuse, as well as HIV/AIDS and self-inflicted injuries. Also, most policies will limit coverage for those undertaking dangerous sports, such as mountaineering, hang-gliding and so on.
Most homeowners will have some kind of life insurance or life assurance policy to cover their mortgage obligations, if they were to pass away. In most cases, insurance companies will easily be able to add a critical illness cover to your existing policy and there is no need to buy a separate policy.
Critical illness policies usually pay out a tax-free lump sum. This type of one-off payment is designed to help you or your dependents cope with financial burdens during the illness, whether it is to pay monthly mortgage premiums or simply use the funds for day-to-day expenses.
It is important not to confuse critical illness coverage with health insurance or personal accident insurance.