My life insurance policy has an option where, if I get a terminal illness, I will get a certain percentage of the face amount. Is this the same thing as critical illness insurance?
In the world of insurance, words matter. And in insurance, “terminal” and “critical” are not the same.
The terminal illness cover (usually only available with a life insurance policy) is also called the accelerated death benefit. It is called thus because instead of waiting for the insured to pass away, the proceeds (or a portion of it) is given to the living Insured once it is ruled that he has a terminal illness. That means that he can use the supposed death benefits for medical expenses or improve the quality of life during his last days.
To further illustrate the difference between the two, here is a table that outlines some of the features of both coverages:
| Features | Critical Illness Cover | Terminal Illness Cover |
|---|---|---|
| Reason for payment |
Diagnosis of a covered critical illness. It will not pay if the illness is not part of the list of covered illnesses. |
Diagnosis that one is terminally ill. This means that it is medically reasonable that the insured will die within 12 months from the date of diagnosis. This will pay regardless of what illness, as long as the prognosis is that the Insured will not survive the illness. |
| How this can be bought |
This can be bought as a separate policy, as a cover combined with life insurance (where an Insured can claim one – either at the diagnosis of critical illness or upon his death) or as a rider bought along with a life insurance or health insurance policy. |
This can only be bought with a life insurance policy. This can’t be a standalone policy. |
| How the proceeds are paid |
The insured gets the full amount. |
Usually, a portion of the life insurance proceeds are “advanced”. The rest of the insured amount will be paid to the beneficiaries upon the death of the Insured. |
| Primary purpose of the cover |
This is to help the Insured get the treatment he needs in the hope of recovering from the critical illness. |
This is to make the Insured comfortable during his last days or for him to have funds to fulfil his “dreams” while he is alive – such as travel abroad. |
| Length of cover |
The insurance usually terminates once the claim is paid (particularly if the insurance is a standalone policy). |
The insurance is still effective until the death of the insured. |
Recommended useful information to read:
- Are you at risk? Critical Illnesses you may be susceptible to
- Things to consider before getting a critical illness insurance policy
- What you should know about Your Critical Illness Cover: The exclusions to your policy
- Save Up on Premiums: factors that affect Your Critical Illness Insurance premiums
- Dos and Don’ts When Making Critical Illness Insurance Claims
