What is Critical Illness Cover?
Critical illness cover is a term used to describe an insurance policy for South Africans that protect them against the financial risks of an illness or injury. It protects the policy holder and their family by providing a lump sum amount to be paid should they fall victim to one of the specified illnesses. Not all insurance policies include critical illness cover, so this article will go into detail about what critical illness cover entails, as well as comparing different providers in South Africa.
Critical illness cover is more commonly known as “critical illness insurance” or “cancer cover” in South Africa and “critical illness cover” in the United Kingdom and its Commonwealth markets. It is also sometimes known by its UK-specific brand name: Critical Illness Protection (CIP) or Life Screen (LS). It was originally designed to protect policyholders from medical conditions which could be life-threatening (eg. cancer, debilitating chronic disease). However, it has since expanded and now includes disabilities (eg. brain or spinal injury), as well as diseases that may not be life-threatening but can severely impact a person’s lifestyle (eg. blindness, severe burns).
Critical illness cover is one of the most comprehensive forms of protection against a wide range of potentially debilitating illnesses or injuries a policyholder can suffer. Some reasons to consider taking out critical illness can be linked to existing policies, such as life cover or an investment portfolio with guaranteed capital protection. Critical illness insurance is often bought as a top-up policy to help increase the amount of money available if the person who has taken out critical illness falls ill, and these cases will only pay out on top of other policies that the person may already have in place. Critical Illness is also now often bought as a standalone product, meaning it is bought for the sole purpose of protecting policyholders from the financial risks associated with a critical illness.
Critical illness cover is open to anyone who has an insurable interest in someone who has signed up for critical illness protection. This can be the policyholder, their spouse, their next-of-kin or any person with whom they have shared access to any property securing coverage under their critical illness cover.
How to Choose The Right Critical Illness Cover
The idea of a critical illness is one that grips the general population. For some, it can lead to a lifetime of suffering and for others, it can be the push that they need to start living their lives to the fullest. We hope this article will help you think about your potential options.
What is critical illness insurance?
Critical illnesses are medical conditions which could severely disable or even kill you within 12 months. The most common ones are cancer, heart attack or stroke. There is no doubt that a critical illness can have a big impact on your life and family, but what you may not be aware of is that it will also likely have an impact on your finances. Critical illness insurance could pay out a lump sum to help with any financial effects of the condition and, in some cases, ongoing expenses such as rehabilitation, medication and costs associated with looking after a disabled person.
How does critical illness insurance work? The cost of the insurance is based on how likely you are to be diagnosed with a critical illness and how much benefit you would receive if diagnosed. The likelihood is estimated based on risk factors, which you, your doctor, or specialist will fill out a questionnaire for. Insurance premiums then vary depending on the amount of risk you present. If you are at a high risk of developing a critical illness, paying for the insurance will be less than if you are at a low risk.
There are two main types of cover:
- Term-to-Term cover: This type of cover is designed mainly for people who don’t have life insurance already. You pay the premiums and, if you become ill within 12 months of buying the cover, your claim is paid out. You can also add or remove cover in blocks of time if you do not wish to be covered for the whole 12 months.
- Lump Sum cover: This type of pay-out value is designed for people who already have life insurance, though it can be used to buy critical illness cover. Lump sum payments are normally paid out in a lump sum when you become ill and there will be no need to continue paying premiums.
Most people choose the last option, as it’s the cheapest. The cost of insurance varies from company to company, and it can be cheaper to pay for insurance upfront rather than insure the whole term with only a short period of cover. However, if you’re not sure about your chances of becoming ill and you’d prefer the peace of mind that comes from being covered for longer than 12 months, a term-to-term policy might be just what you need.