Preparing for the unexpected: The importance of Critical Illness Insurance

4-minute read

This loss of income can have a cascading effect on one’s lifestyle, from paying bills to supporting one’s family both physically and financially. Critical Illness, whether it is caused by accidents, illnesses, or other unforeseen circumstances, can disrupt lives in ways you may never have imagined.

Critical Illness insurance, also known as Trauma insurance, is a form of life insurance cover that grants a financial payout if the specified condition and its severity are covered by the policy. In the event of a payable benefit, it can assist in covering daily living costs, enable the insured to pursue necessary medical care and related options for their illness, and contribute to maintaining the quality of life for the insured's family during the treatment period. This financial support acts as a 'cushion,' allowing the individual to concentrate on recovery without the added concern of the financial consequences of the illness or injury.

Benefits of having Critical Illness insurance (Trauma insurance) in place

A Critical Illness benefit is versatile. It provides the flexibility of using the funds as one wishes, whether it is to help with medical treatment, rehabilitation, mortgage payments or other expenses. Without adequate insurance coverage, these financial burdens can quickly drain a person’s savings. Critical Illness covers specified serious events such as a heart attack, cancer, or stroke, although this is not an exhaustive list.

Opting for Critical Illness insurance (also known as Trauma insurance) may be a practical and responsible decision, depending on the situation. It ensures financial stability and a sense of reassurance during the recovery process. Possessing a Critical Illness insurance policy may offer the means to financially assist with the expenses associated with treatment and recovery in unforeseen life-altering circumstances. Additionally, there might be extra benefits and customisable options available for inclusion in a Critical Illness insurance policy at an extra expense. These features, which vary among insurers and policies, may include but are not limited to:

• Inflation protection: An option to annually increase the insured amount to account for inflation.
• Premium freeze: An option to lock in the premium while decreasing the insured amount.
• Guaranteed future insurability: An option to boost coverage without the need for underwriting, triggered by specific life events such as having a baby.
• Grief support: A service assisting customers and their families.
• Financial planning: May provide a payment to aid customers and their families in working with a financial planner.

Critical Illness insurance is generally available as a stand-alone policy or can be associated with a Life insurance or Total and Permanent Disability policy. Choosing linked policies might result in overall lower premiums compared to maintaining each insurance type separately. The reason behind this is that, in linked policies, a payout on one policy (such as Critical Illness) tends to decrease the coverage amount on the interconnected policy (like death cover). In contrast, stand-alone policies operate independently, meaning a claim on one policy (e.g., Critical Illness) does not affect the coverage amount on another policy (e.g., death cover).

Child's Critical Illness insurance is also a life insurance option available by most insurance providers. Similarly, it provides a lump sum benefit in the event that a child experiences a Critical Illness (or Trauma) meeting the severity criteria. This can offer essential financial reassurance if the policyholder's child faces a critical illness, and the policyholder is unable to work. This gives the insured the ability to support their child through medical treatments and recovery without the need to juggle work. It's important to note that there are usually limits on the coverage amounts. For further information contact the insurance provider or visit the TAL Website.  

Illnesses and injuries excluded under a Critical Illness insurance or Trauma insurance policy

When acquiring any insurance cover, it is important to understand the terms, conditions, and exclusions outlined in each policy. The Product Disclosure Statement (PDS) serves as a valuable resource for obtaining more detailed information about each type of coverage. Key aspects to consider encompass common terms, conditions, and exclusions, such as:

Pre-existing conditions

Pre-existing conditions refer to health issues that the insured person had before obtaining the policy. Critical Illness policies might not provide coverage for pre-existing conditions, making it essential to understand the policy's terms.

Additionally, many Critical Illness policies impose a qualifying period for specific Critical Illness events. This implies that if the specified Critical Illness occurs after purchasing the policy but within the qualifying period, the policy may not cover that particular Critical Illness.

Excluded medical conditions

Not all Critical Illnesses are covered, and severity of illnesses are defined. These illnesses and definitions will vary between policies. For example, not all cancers are covered.

Bridging the gap in health insurance with critical illness cover or trauma insurance cover

While health insurance covers many medical expenses, it may not cover all the costs associated with a critical illness (or trauma event). There may be non-medical expenses that health insurance does not address. Critical Illness cover may fill these gaps, helping with out-of-pocket expenses that can strain finances.

When considering Critical Illness insurance (or Trauma insurance), it is essential to carefully review policy terms and compare policies from different insurers to choose the right coverage. With the right policy in place, the insured can face the uncertainties of life with more confidence and resilience.