Preparing for the unexpected: The importance of Critical Illness Insurance

4-minute read

This can lead to a ripple effect on one's lifestyle, impacting everything from bill payments to the physical and financial support of one's family. Critical Illness, whether stemming from accidents, illnesses, or unforeseen circumstances, has the potential to disrupt lives in unforeseen ways.

Critical Illness Insurance, (Trauma Insurance) is a type of life insurance cover that offers a financial benefit if the condition and severity are covered by the policy. If a benefit is payable, it may provide the ability to cover day to day living expenses, allow the insured to seek medical care and options related to their illness, and support the insured’s family’s quality of life during the insured’s treatment. This financial 'cushion' may provide the ability to focus on recovery without worrying about the financial impact of the illness or injury.

Benefits of having Critical Illness Insurance (Trauma Insurance)

The versatility of a Critical Illness benefit offers the freedom to use the funds according to one's needs, whether for medical treatment, rehabilitation, mortgage payments, or other expenses. Insufficient insurance coverage can rapidly deplete an individual's savings when faced with these financial burdens. Critical Illness covers specified serious events like heart attacks, cancer, or strokes, though this list is not exhaustive.

Having Critical Illness Insurance (Trauma Insurance) may be a prudent and responsible choice, depending on the circumstances. It may support your day to day expenses and provide a sense of reassurance during recovery. Having a Critical Illness insurance policy in place may provide the ability to financially support the costs involved in treatment and recovery when life takes an unexpected turn. There may also be additional benefits and options which can be added to a Critical Illness Insurance policy at an additional cost. These key features may include, but are not limited to (and will vary between insurers and different policies):

• 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 linked with a Life insurance or Total and Permanent Disability policy. Choosing linked policies may result in overall lower premiums compared to maintaining each insurance type separately. The reason behind this is that, in linking policies, a payout on one policy (such as Critical Illness) tends to decrease the coverage amount on the interconnected policy (like life insurance). 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., Critical illness).

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 may help to lighten financial pressures, allowing recovery of the child’s injury or illness to be the focus. 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 not covered 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:

A pre-existing condition

Pre-existing conditions are conditions the person insured had prior to taking out the policy. Critical Illness policies may exclude cover for pre-existing conditions, so it is best to understand the terms of the policy.

Many Critical Illness policies will have a qualifying period for certain Critical Illness events, which means if the specified Critical Illness occurs after the policy is purchased but within the qualifying period, the policy will not cover that Critical Illness.

Medical condition exclusions

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.

Closing the health insurance gap 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.