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Critical Illness & Disability Insurance: What You Should Know

October 3, 2023

Life is unpredictable and unexpected events such as critical illnesses or injuries can disrupt our plans and financial stability. 

To protect ourselves and our loved ones from the financial impact of such situations, it's essential to consider critical illness insurance and disability insurance and understand what both can do for you. 

In this blog, we'll explore what these insurance policies are, how they work, and what you need to know to make an informed decision.

What Is Critical Illness Insurance?

Critical illness insurance is a safety net that provides a lump-sum payment in the event you are diagnosed with a covered critical illness. These illnesses often include cancer, heart attack, stroke, organ failure, and more. 

The lump-sum payout can be used for medical treatments, debt payments, mortgages, or any other financial needs during your recovery period.

What You Should Know About Critical Illness Insurance:

There are a few things you should consider when deciding if this type of insurance is for you. This includes:

  • Familiarizing yourself with the list of illnesses covered by the policy. Each insurance provider may have different conditions on their list.
  • Understanding the waiting period. This is the time between diagnosis and receiving the payout. It can vary from policy to policy.
  • Understanding the cost. Critical illness insurance premiums may be higher due to the comprehensive coverage it provides. Consider your budget and needs before choosing a policy.

What Is Disability Insurance?

Disability insurance is designed to replace a portion of your income if you become disabled and unable to work due to an illness or injury. This policy provides financial support during the time you are unable to earn an income, ensuring you can meet your living expenses and maintain your lifestyle.

What You Should Know About Disability Insurance: 

Disability Insurance is different than critical illness insurance in a number of different ways. Here are some things you should consider:

  • Different policies may have varying definitions of disability, so carefully review what qualifies as a disability under the policy you're considering.
  • Disability insurance comes with a waiting period before benefits kick in. Longer waiting periods usually result in lower premiums.
  • Understand what percentage of your pre-disability income will be replaced by the policy. This can range from 50% to 80% or more.

Difference between Critical Illness and Disability Insurance

The main distinction lies in the events they cover. Critical illness insurance pays a lump sum upon diagnosis of a covered illness, whereas disability insurance provides regular income replacement if you're unable to work due to an injury or illness.

Key Points to Consider:

  • Combined Coverage: While critical illness and disability insurance have different focuses, some policies may offer combined coverage. Discuss this option with your insurance provider to see if it aligns with your needs.
  • Importance of Disability Insurance: Disability insurance is often overlooked but is crucial for anyone dependent on their income. It ensures financial security during challenging times and allows you to focus on recovery without worrying about finances.
  • Employer-Provided Coverage: Some employers may offer disability insurance as part of their benefits package. However, it's essential to review the coverage and consider additional individual policies to fill any gaps.

Critical illness and disability insurance are invaluable tools to safeguard your financial future in the face of unexpected health challenges. Understanding the differences between the two and the specifics of each policy is crucial to making the right decision for your needs. Consult with insurance professionals and carefully review policy terms before selecting a plan. By taking this step, you can secure peace of mind, knowing that you