Life Insurance with Critical Illness Coverage

Life insurance with critical illness coverage provides a lump-sum benefit when you suffer a covered illness. It allows you to pay for expenses that your health insurance may not cover, such as your family living expenses, transportation needs and medical treatments by medical providers that are not covered by your health insurance. As long as your illness is named in your policy, you can use the money any way you choose. Here’s what you need to know about this coverage:

How it Works

Life insurance with critical illness is not a separate life insurance policy. The critical illness portion is a supplement to the policy, which may or may not be added for free. It’s important to ask your life insurance company whether there’s a charge to add it to your existing policy. Most companies charge additional premiums, based on your occupation. If you’re looking for life insurance, you can use the cost of a critical insurance supplement as a factor when you compare policies.

When you buy critical illness coverage, you are guaranteed a one-time payout as long as you meet the requirements of the policy. The illness must be life-threatening, or it must result in a permanent disability. Some of the conditions covered include a stroke, cancer and recovery after a heart attack. Many companies will only give you a one-time life insurance payout, but a few companies may provide an additional occurrence benefit. You also may have to take a medical exam prior to obtaining coverage.

Advantages of Life Insurance with Critical Illness

The chief benefit of critical illness coverage is to provide income protection. When you’re suffering from a life-threatening illness, you’re probably not going to be able to derive the same level of income or you may not be able to make a living at all. The bills don’t stop coming in, and you’ll have more bills to pay that arise from medical related costs. The coverage gives you the money and the discretion to use the benefit in any way you want. There is are no rules that dictate where the money has to be spent. Other advantages of critical illness coverage include:

  • Available to you after retirement
  • No disability is required to receive the benefit
  • No requirement to submit expense receipts to obtain benefit

Disadvantages of Life Insurance with Critical Illness

While there are advantages to critical illness coverage, it’s not the best choice for everyone. There are disadvantages to this type of coverage. Some of these include:

  • More expensive than other types of income protection coverage
  • No benefit is paid if you face a serious illness that is not covered
  • Varying premium rates, based on the type of job

Other types of policies, such as short-term or long-term disability insurance may be a better option. Before you purchase insurance, weigh the advantages and disadvantages carefully. Begin by comparing your life insurance with critical illness coverage to other forms of income protection coverage. This coverage may not be your best, or most affordable choice.