Critical illness insurance pays a single lump sum, which is generally not taxable if you are diagnosed with a serious condition named in the policy and you meet its conditions. You can use the money however you choose: treatment not covered by public health care, time off work, travel for care, or everyday bills.
How it works
The policy lists the conditions it covers. Common ones include cancer, heart attack and stroke, and many policies list more. Each condition has a precise definition, and a diagnosis only pays if it meets that definition. Most policies also require you to survive a waiting period after diagnosis, often around 30 days.
What it is not
It is not health insurance and it does not replace disability insurance. It pays once, when a covered condition is diagnosed, rather than replacing income month by month.
What to compare
- Which conditions are covered, and how each one is defined, including early-stage conditions.
- Whether there are partial payments for less severe conditions.
- Whether the policy returns premiums if you never claim, and what that adds to the cost.
- How long the cover lasts, and whether it is level for life or renewable at increasing rates.
- What is excluded, including pre-existing conditions.
Questions to ask an advisor
- Which conditions are covered, and what exactly counts as a diagnosis for each?
- What happens if I make a claim: does the cover end, or can I claim again?
- What would I still be responsible for?
Common mistakes
- Assuming "critical illness" means any serious illness. Only the named conditions count.
- Not reading the definitions, which are where most claim disputes start.
- Treating it as a substitute for disability insurance.