Critical Illness Cover
What is it?
Critical Illness or serious illness protection, provides a payment of a lump sum in the event of the life assured being diagnosed with a specific illness as specified under the policy.
In circumstances where a life assured contracts a serious illness which is covered by his/her policy, the cover provides financial support in circumstances where the life assured and his/her family do not want the additional stress of worrying about money.
Critical Illness Statistics
The statistics below illustrates some of the harsh facts related to cancer. Cancer along with heart disease, makes up approximately 60% of cases of premature deaths (age 0-64) in Ireland Source » Central Statistics Office.
|Risk to Age 75
Source » National Cancer Registry Ireland
The table above illustrates the risk of contracting cancer before age 75. The risk is higher for men 41%, than women 37%. But more importantly the chart illustrates that the death rate for cancer in the same year was 12% for women and 17% for men.
Being diagnosed with cancer does not necessarily spell the end. On the contrary focusing on the data above, for women there is an approx 70% chance, that if you have been diagnosed with cancer, you will survive for a period of more than one year. If you are a man and you have been diagnosed with cancer, there is a 58% chance that you will survive for a period of more than one year.
This 1 year plus survival rate underlines the need for critical illness cover, for those who will need to have financial support when facing the battle against critical illness. You don’t want to have financial worries when you are trying to focus on survival.
Accelerated Cover, Versus Stand Alone Cover –
Critical illness can be added to a life policy on an accelerated basis, so the payment of a claim under the critical illness cover, reduces the balance of the life cover remaining on the policy. The other option is to have the critical illness as stand alone, in this way the critical illness cover is separate from the life cover, or may even stand alone without any life cover.
Example: Accelerated critical illness –
Life of Mr. Billy Bob is assured for €250,000 with €100,000 accelerated critical illness cover, under a 35 year level term policy commencing at age 30. Billy is diagnosed at age 55 with cancer, which is one of the critical illnesses which is covered under the policy. The life company pays over to Billy €100,000. There is still €150,000 life cover on Billy’s life (€250,000- €100,000).
Billy recovers from the illness, however he dies at age 60. The life company pays out the remaining life cover benefit of €150,000 to Billy’s estate.
Example: Stand Alone critical illness –
Life of Mr. Billy Bob is assured for €250,000 with €100,000 stand alone critical illness cover, under a 35 year level term policy commencing at age 30. Billy is diagnosed at age 55 with cancer, which is one of the critical illnesses which is covered under the policy. The life company pays over to Billy €100,000. There is still €250,000 life cover on Billy’s life, as the critical illness cover was stand alone or separate from the critical illness cover.
Billy recovers from the illness, however he dies at age 60. The life company pays out the life cover benefit of €250,000 to Billy’s estate.
How Does This Type of Policy Differ From Permanent Health Insurance?
Permanent health insurance pays out a regular income to a life insured, if they are unable to work, due to; (any) illness or (any) injury and the life assured suffers a loss of income. In contrast, a critical illness policy pays out a lump sum if the life insured is diagnosed with a specified illness, which is specified as a covered illness within the terms of the critical illness policy. There is usually also a survival period built into the policy conditions. The standard survival duration is 14 days from date of diagnosis.
It’s important to note that there are very specific definitions of the types of critical illnesses covered. It will also be a requirement for a successful claim that the medical diagnosis matches the definition of the illness as per the policy.
How Much Does it Cost?
Critical illness cover is more expensive that term life cover. The reason is that; despite the fact that all of us will die one day, most of us have a chance to live into big numbers. However statistically there is a higher percentage chance that many of us will be diagnosed with a critical illness, by the age of 65. The usual factors apply on price; level of cover, duration of term, smoker status, health status and age.
The table below shows the risk of developing cancer in different age group:
|Risk of Developing Cancer
|% of all Cancer Cases Diagnosed
Source » National Cancer Registry Ireland