Purchasing Insurance For Critical Illness Coverage
While the whole life insurance or term life insurance cover you for death and permanent disability, you would need to get the critical illness add ons in order to protect yourself from terminal illnesses as well. Do take note that CI policies are different from hospitalization policies, which cover your medical bills. In the event of an illness, you might be unfit to continue working and hence there will be a loss of income so CI policies are usually known for “income replacement” purposes.
There are currently a few types of insurance policies that cover critical illness in the current market. I will be sharing some pointers to take note of while purchasing plans for critical illness.
Needless to say, you would have to first start off with the coverage. Most policies out there cover at least 37 illnesses including heart attack, stroke and cancer. However, you should still look at the list of illnesses being covered instead of looking only at the premium you have to pay as not all policies are the same.
Some companies out there do claim to cover over “90 conditions” so do be careful as what they are actually referring to is the different stages of the exact critical illness.
Although the policy might cover critical illnesses for various stages, do check if you are covered for the early stages. Nowadays, most insurance companies do offer the coverage for early stage diagnosis of illnesses. It does pay off to still check the criteria for early stage, intermediate stage and severe stage. You will not want to be disappointed to find out that you are not going to get your money because your stroke was not severe enough.
2) Sum Assured
As CI policies come in a few forms, the mechanics of it largely stay the same – you will get a lump sum payment upon the diagnosis of any illnesses specified in the policy. There are some insurance policies which pay out 100% of the sum assured immediately upon an eligible diagnosis regardless of the stage. In other words if you are covered for $100,000 and you get diagnosed with an early stage cancer, you will receive the full amount fo $100,000. On the other hand, there are also other insurers which would give you the payments in various tiers. For instance, if you get covered for $700,000 and were diagnosed with early stage cancer, you might only receive a maximum payment of $200,000. If you get diagnosed with a more severe illness (like late stage cancer) in the future, only will you then receive the remaining $500,000.
3) Cash Out Benefit
Many of the times, when you request to purchase a CI Term Plan from an agent, they would push many other various life plans for you. The difference between a CI Term Plan and CI Life Plan is that the former has no cash value payout while the latter has. More often than not, the premium amount for life plans are much higher but covers you for life. Whereas for term plans, the coverage is “pay-per-coverage” such that you would be covered for life, but rather, covered as you pay. That being said, you should always look at the coverage term. Coverage term is the period of time that you lock in your premium amount whereby your premium amount will not change. The longer the period, the more expensive it will be, but also the more secured it is for you to lock in a basic amount.