The difference between life insurance and critical illness cover, types of protection offered by various companies is sometimes not always well understood.
Here is a quick guide to some of the key points:
1) As the name suggests, life cover exists in order to protect your dependents against the financial consequences of your death. There is a wide range of such policies available, with many being aimed at protecting families who may be financially exposed by the premature death of a significant income provider;
2) By contrast, critical illness cover is aimed at offering a degree of financial protection in circumstances where the policyholder is suffering from a critical medical condition that might, amongst other effects, mean they are unable to continue earning income;
3) Within these two generic descriptions, there are many potential variations and options;
4) For example, life insurance might be directly linked to paying off the reducing over time debt of a mortgage and therefore be described as a decreasing term policy. In other circumstances, you might prefer a policy that will always pay out the same amount of money irrespective of when the death of the insured occurred in the term of the policy that form of cover is typically referred to as a level term policy;
5) Providers of both types of protection may need to know a little of your medical background before deciding what type of cover is appropriate and inevitably, at what cost. In some circumstances, you may be required to attend a medical and some questions relating to your medical background are inevitable in the case of a typical application;
6) Policies might differ in the sense of what they define as being a critical illness. Some may have a very extensive list of conditions included though others may be rather more limited. It is important to familiarise yourself thoroughly with the cover provided by any policy prior to purchasing it;
7) In some situations, it might be possible to have an integrated life and critical health policy. Some life policies might also, in certain situations, agree to make a pay out in the event of a diagnosis of a terminal condition. Of course, if you have a combined policy of this nature, it might typically pay out in one condition or the other but not both. An experienced insurance provider might be required in order to help you understand the complexity of your options in these areas.
Whether you need this type of insurance cover is something that, of course, only you can decide.
Yet it might be advisable to avoid slipping into the trap of assuming that lifes misfortunes only happen to other people and never to you. If you would like to believe that your family will be able to cope in the event of you suffering a critical illness or premature death, it might be worth thinking about these types of cover a little further.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.