Today’s world has become massively calculated and making the right decision is becoming trickier.
Have you been observant and made the right decision for the insurance you have chosen?
We want choices that are doubly beneficial.
Let’s look at discuss life insurance with critical illness insurance and guide you on how to decide on choosing one or both of them as a combination policy.
How Do Life Insurance and Critical Illness Insurance Differ?
The difference between life insurance and critical illness insurance can be made clear in the example below:
David, aged 40, a father of two and happily married, faces declining health suddenly and decides to visit the doctor. The doctor asks him to get several important tests done. This leads to a diagnosis of colon cancer. The cancer is yet in the initial stage and this comes as a shock to the family.
David immediately starts treatment and the financial cost is huge.
With help of critical illness insurance, David will be paid a tax-free lump sum amount immediately after the diagnosis. He can use this payment for multiple expenses. These can be either of medical nature like doctor fees, buying treatment drugs etc or of non-medical nature like groceries, children’s tuition fee etc.
However, if David is diagnosed with the last stage of colon cancer and lives only for a few more days (less than 30), he will not get critical illness insurance claim (although premiums paid will be refunded if the policy mentions it).
This is a prime requirement of critical illness insurance.
According to the requirements, the recipient has to survive a period of more than 30 days for a successful claim. However, David’s death will lead to a successful life insurance claim. This will help protect his family in event of his death.
How Life Insurance with Critical Illness Coverage Works: Your Primary Options
There are two ways for life insurance with critical illness coverage to work:
Fusion of Life Insurance with Critical Illness Policy
A fusion of these two policies will mean that you get the double protection. You or your beneficiaries will be paid in case of a diagnosis of critical illness or death respectively. However, a successful claim can be made only once. Once a claim is made, the critical illness life insurance policy will end.
For example, John gets diagnosed with a critical illness. He gets a payout from his fusion policy.
Now the policy will be terminated and he will not get anymore amount in case of his death.
Life Insurance with Critical Illness Coverage
In this case, you will have to pay additional premiums for a critical illness rider alongside your life insurance policy. Once you have used up the critical illness rider, your life insurance policy will remain. Your premiums will decrease after using up the critical illness rider.
For example, Sara gets diagnosed with a critical illness. She gets a certain portion from her life insurance in lieu of critical illness rider. Her beneficiaries will still get a certain amount on the event of her death. She can also avail a buyback offer and buy the critical illness rider again after a certain time has elapsed.
The reasons critical illness life insurance are offered together are:
- Life insurance with critical illness coverage is offered since they perfectly complement each other.
- Separately they offer you partial protection but together they will offer a comprehensive and powerful protection plan.
- Both offer tax-free payouts.
- They will cost you more than if you purchase a combination policy. For example, Mathew invests in two separate policies while John goes for a combination policy.
INSERT TABLE HERE
This example shows that over the years, Mathew will be paying more than John.
Factors to Consider: How to Choose between Critical Illness Life Insurance Combination Policy or Just Choosing one Policy?
Here are a few factors to consider that will point you towards a particular policy:
Medical History: If you have a medical history of a critical illness, choose a life insurance policy on its own or a combination policy. This is because critical illness policy alone will cost you a hefty amount or might not be available.
Age: In case you are below 40 years of age, it is better to go for a critical illness coverage. In case you are over 40 years, it is wise to seek a combination policy. This way you can get a safety net either ways.
Income Status: Your income will be a defining factor in choosing the right policy for you.
Number of Dependents: In case you are single, go for critical illness coverage. If you have dependents relying on you, a combination of Life insurance with critical illness is a wiser option for you.
This will strengthen you financially and gives extra protection.
How to Qualify For Life & Critical Illness Insurances
You will qualify for critical illness insurance if:
- You fall into a certain age range defined by the policy
- You have not been attacked by any critical illness before
- If you have cleared a medical examination (certain companies ask for it)
- If you have provided complete information and documentation
- You are a permanent resident of the area of authority/operation of the insurance company
You will qualify for life insurance if:
- You fall into a certain age range defined by the policy
- You have not been attacked by a critical or terminal illness (not all companies will approve your application)
- Your lifestyle and activities are not highly risky
- Your criminal record is clean
- You have no DUI’s in the past years
Choosing the Right Policy
Oftentimes, there is no right or wrong policy on the surface level.
However, due to your statistics, a certain policy is more useful and a much wiser option to opt for.
Getting a combination policy will mean an added layer of protection and gives you additional peace of mind. It is important to choose wisely while keeping all the various factors in mind.