What is critical illness insurance?

Critical illness insurance is an insurance product designed to pay out a lump sum to a customer who is diagnosed with a critical illness. Should that customer be diagnosed with a critical illness from the critical illness insurance providers list of illnesses, and survive the initial survival period after first diagnosis, then the customer will be paid a lump sum payment, which will be tax free.

The survival period is usually around 28 days, but will vary from insurer to insurer.

How does critical illness insurance work?

Critical illness insurance is a pretty simple insurance product, but will vary from insurer to insurer. A customer will pay a monthly premium, which will vary based on the age, lifestyle habits and previous medical history of a customer. In return, the insurance company will pay a tax free lump sum payment to the critical illness insurance customer if they are diagnosed with a critical illness. There are different numbers of critical illnesses covered, depending on which critical illness insurance provider you choose. One company now covers over 160 different illnesses.

Where does critical illness insurance come from?

Critical illness insurance was created in 1983 in South Africa by the world’s first heart transplant surgeon, Dr Barnard. Dr Barnard became frustrated that his patients were spending more time worrying about their financial situation while they were unable to work, than they were focusing on their own recovery.

Critical illness insurance has grown massively from the first product, and is now available all over the world. From the original product which featured just four illnesses, some policies now have over 150 different illnesses they cover.

Why do I need critical illness insurance?

If you have any sort of financial responsibilities, then critical illness insurance is for you. A critical illness can leave a patient off work for a substantial amount of time, often longer than their sick pay lasts for, and a large proportion of those patients will never return to work, at least not in the same capacity.

Critical illness insurance provides cover for such an eventuality, and the money you receive can be used to make up for lost income, allowing you to continue paying a mortgage and supporting your family.