What Is Critical Illness Insurance?

Critical illness insurance is an insurance product, where the insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the critical illnesses listed in the insurance policy.

The policy may also be structured to pay out regular income and the payout may also be on the policyholder undergoing a surgical procedure, for example, having a heart bypass operation.

The policy may require the policyholder to survive a minimum number of days (the survival period) from when the illness was first diagnosed. The survival period used varies from company to company, however, 28 days and 30 days are the most common survival periods used.

Critical illness cover was originally sold with the intention of providing financial protection to individuals following the diagnosis or treatment of an illness deemed critical. The finances received could be used to:

• pay for the costs of the care and treatment;
• pay for recuperation aids;
• to pay debts off;
• replace lost income due to a decreasing ability to arn;
• fund for a change in lifestyle.

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