- Pays a cash benefit to the insured diagnosed with a terminal illness
- If attached to Life policy as rider it advances some death benefits before death
- Allows the insured person to enjoy more their last days before expected death
- Stand-alone policies can be in addition to existing Life coverage
Critical Illness insurance is similar to Life insurance and most often is made available by Life companies attached as a rider to their Life policy. When attached to a life policy, in a nutshell, full or partial payment of the Life insurance policy face amount is paid to the living policyholder (insured person) if he or she is diagnosed with a terminal illness or incurable dread disease. The most familiar is an advanced case of cancer. All common types are noted in the policy and sales materials of the insurance firms.
By paying this advance of the Life policy's death benefit the insured person has benefit of using this cash for whatever is desired prior to his/her diagnosed ailment and expected death. This cash allows the person to enjoy more his/her last days while alive with friends, family members and others. Some decisions could be made because of this payment that could not have been made if the benefit was not paid. Because normally only a portion such as 25-50% of the death benefit is advanced to insured, the balance still remains available in the policy for nominated beneficiaries of the insured and is paid to them once death actually occurs. A few Life companies will allow applicants several options to choose from in setting up a critical illness portion of their coverage. Not all Life companies offer this cover.
There are companies offering "stand alone" policies. These policies pay a pre-enrollment sum of cash to the insured when later in life he/she is diagnosed with one of a list of specific illnesses. This benefit would be paid regardless of whatever life coverage is in place with other insurance companies. It simply pays the sum insured when the insurance company's doctor diagnoses (or confirms the diagnosis) the critical illness. Usually there is an exclusion period of time one must be covered before certain ailments qualify for coverage. Also, the period of cover often ends at a certain advanced age. However, pre-enrollment requirements usually help both parties to feel comfortable in eventually entering into a mutually acceptable agreement for insurance. Relatively new to most people, this coverage is selling at an ever-increasing rate for reasons that seem obvious to buyers. Traditional Life insurance (more like death insurance) can now live up to its actual name (Life) for some policyholders.