Critical Illness Cover: Why You Need One & What Does It Involve?

As a whole, we humans have never been good at preparing ourselves for the worst. The less desirable a future event is, the less likely are we to think that it can happen to us. And this is perhaps the main reason why many people avoid investing in a critical illness cover. After all, getting one requires you to come face to face with the possibility that you may someday in the future get affected by a debilitating disease such as cancer or stroke. But life is unpredictable, and people do get sick. So, now is the time to ask yourself: If I am to become critically ill, how will my family and I be able to cope financially?

While this isn’t a nice question, it’s still an important one to think about. After all, serious illnesses render people unable to work, and with the low wages, high mortgages, and constantly rising living expenses, going a few months without pay can spell disaster. Especially if you’re the sole breadwinner in your family. Then, there are also the medical bills to worry about. Even if you believe that you’ll be protected by standard health insurance, it often isn’t enough to entirely cover the medical bills involved in treating a severe illness.

bills to pay

But when diagnosed with a critical illness, struggling with the symptoms and the harsh and often invasive medical treatments is hard enough on its own without the financial side to think about. And during such an emotionally and physically wrecking situation, it’s really unfortunate that money problems should cause additional stress. With that being said, investing in a critical illness cover can take at least your financial worries away, so that you can invest more energy into fighting the disease and getting better.

Critical illness covers are a form of insurance that pays out a tax-free sum in the event that you are diagnosed with a serious illness or medical condition. You can spend the money however you find best. For instance, you could use it to pay for medical bills, clear any debts, adapt your home to your needs or invest it and potentially gain further income. However, different insurance companies offer different covers. For instance, some covers pay a single lump sum of a few tens of thousands of dollars. While most insurance companies pay out only once, some are also willing to make a small payment if diagnosed with a less severe condition, allowing you to make a further claim if affected by a more serious illness in the future.

However, people who are diagnosed with a long-term illness, such as Chron’s or Multiple Sclerosis won’t really benefit from a lump sum payment. In fact, what they do need is a cover that can provide them with regular income to take care of their bills the entire time they are unable to work. These types of covers are also referred to as “income protection” policies and are designed to provide a monthly of up to 80% of the insured’s income until he or she is able to work again. So, make sure to thoroughly consider the pros and cons of both of these options.

In addition, it’s also important to read the fine print and understand what exactly the policy involves. The policy will only pay you out if you’re diagnosed with a disease that is on its list. Some companies might include 50 diseases, while others more than 100 ailments. For instance, some forms of cancer are often not included because they are easily treatable. Similarly, mild heart attacks or strokes can also be excluded from the list on the basis of severity. In general, when choosing a cover, it’s recommended to consider your family’s medical history and your overall risk of developing certain conditions.

health insurance form

For instance, if there’s a high rate of breast cancer in your family, you should focus on finding a policy that is generous in that area. If heart attacks have been common in your family, look for a policy that covers them. In addition, you also need to consider the cost of the insurance policy. In general, getting insured young is preferable as the cost of these policies rises with age. What’s more, factors such as obesity and smoking can also affect how much you’ll pay for staying insured. You can also consult one of many price comparison websites to help you find the best deal for your needs.

It’s also important to know that even if you’re afflicted by an illness that’s included in the list of the cover, there are certain situations where a critical illness cover won’t be paid out. Usually, this is the case if the critical illness results directly from any of the following:

  • a pre-existing condition
  • working in hazardous conditions
  • participation in an illegal activity
  • as a result of war
  • due to attempted suicide or self-inflicted injury

In addition, the benefit won’t be paid if the policyholder passes away with 30 days of being covered or if he or she has been living outside of Australia for more than 12 months in a row. What’s more, most critical illness covers prevent the policyholder from accessing any benefits for any illness he or she is diagnosed with within 90 days after the cover start date. The cover start date is specified on the policy’s schedule.

Many insurance companies will also provide cover for the children of the policyholder until they are 18 without any additional cost. In their case, the payout will be around 25% to 50% of the total sum of the policy. If you have had a policy for years and your health has remained the same, you can try to negotiate a new plan with better terms and at a lower cost with your insurance provider. But don’t cancel your existing plan without completely assessing the pros and cons and consulting with a specialist broker. Some older plans may include better terms on some illnesses, for example, some forms of cancer.

All in all, if you’re considering getting this cover, make sure to take your time and research your options thoroughly.