The Basics of Critical Illness Insurance

Tyler Olson/
min read
Updated: 13 June 2023
Written by
Insuranceopedia Staff
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Key Takeaways

  • Critical illnesses can put anyone at risk of financial ruin due to the resulting medical fees and related expenses. Critical illness coverage may help fill in the coverage gaps and ensure serious health conditions don’t put you and your family in the red.

Critical illness insurance offers financial protection to the policyholder against the risk of developing certain serious health conditions. These may include severe injuries, stroke, heart attack, certain cancers and stages, as well as major surgeries. The policyholder typically receives a lump sum payment or structured payouts after making a valid claim. The policy dictates the required severity of the conditions to be considered covered. It may also list the tests needed to confirm the diagnosis. Therefore, it is helpful to have at least a basic understanding of its advantages, benefits, and coverage extent.

Who Needs Critical Insurance Coverage?

Due to life’s uncertainties and the fact that the statistical probability of any adult developing a critical illness is relatively moderate to high, critical illness insurance can prove to be a financial lifesaver for many, especially those who don't have savings set aside in case of a serious illness or disability. Keep in mind that medical expenses have led a sizable number of people to bankruptcy.

Individuals without employee or retirement benefits that can support long periods without direct income due to an illness or disability may want to consider critical illness coverage and other disability plans (Read How Do I Know If I Need Disability Insurance? to find out whether you may also want to consider disability insurance).

What Affects Your Premium?

The premium for critical illness insurance depends on a number of factors, especially as it may be an additional benefit to a health or life insurance policy. Factors include the overall coverage amount you want, given your current health status; your family medical history; your weight; age; and occupation. Insurance companies would rely on such information to assess the level of risk you pose of filing a valid claim and determine your premium accordingly.

What Are the Benefits of Critical Illness Insurance?

The claim payout allows you to pay for various expenses you would incur following a diagnosis of a serious health condition. First, you can use it to access the best medical treatment, which may not be available nearby. In this way, you can fund your travel, accommodation and medical expenses. Second, the money can allow you to make necessary modifications to your home or vehicle to aid in mobility, if necessary. Third, you might need to private in-home care or additional help at home to help you through the recovery period. Furthermore, it gives financial security to cover daily expenses and debts during this period of illness. Finally, depending on your insurer, you may have the option to enjoy various other assistance services, such as daily expenses benefits, health resources, and more.


As life can bring unexpected surprises and unfortunate tides, it's important to understand whether critical illness may be right for you and how it would benefit you. Although it represents an ongoing investment, it may very well pay off in a big way in case you develop a serious health issue.

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