Critical Illness Insurance

What is critical illness cover?

Critical illness cover is an insurance product where the insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the critical illnesses, or suffered certain accidents, listed in the insurance policy.

The policy may also be structured to pay out a regular income and the payout may also be claimed if the policyholder undergoes a specified surgical procedure, for example, having a heart bypass operation.

The policy may require the policyholder to survive a minimum number of days (the survival period) from when the illness was first diagnosed.  The survival period used varies from company to company, however, 28 days and 30 days are the most common survival periods used. 

The contract terms contain specific rules that define when a claim for critical illness is considered valid.  It may state that any diagnosis is made by a physician who specialises in that illness or condition, and it may name specific tests.

In some markets, however, the definition of a claim for many of the disease and conditions have become standardised, thus all insurers would use the same claims definitions.  The standardisation of the claims definitions may serve many purposes including increased clarity of cover for policyholders, and greater comparability of policies from different life offices.  For example, in the UK, the (ABI) has issued a Statement of Best Practise which includes a number of standard definitions for common critical illnesses.