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Last Updated on 10 December 2019

Critical Illness Insurance

Critical illness insurance provides protection for you if you are diagnosed with a serious medical condition. Unlike income replacement insurance, the purpose of critical illness insurance is not simply to get money into your pocket when you cannot work. You receive a lump sum payment when you have critical illness cover and are diagnosed with an illness that makes you eligible for benefits. You can do whatever you would like with this money, from paying medical bills to paying off your mortgage to taking time off to be with your family.

What is critical illness cover?

Critical illness cover, or trauma cover as it is sometimes called, will pay you a lump sum amount upon a diagnosis of a covered illness. You are paid this amount regardless of whether your illness affects your ability to work or not. There are no restrictions or limitations on how the money is spent, so it gives you the ultimate in freedom and flexibility during your time of need.

Why purchase critical illness cover?

Purchasing critical illness cover means you will not have financial worries at the same time as you have health concerns. Being diagnosed with a serious illness can result in extensive medical expenses (even if you have insurance). You may want to see a specialist your health insurance does not cover, or seek alternative treatment. Your lump sum payment can cover whatever care you want or need.

You may also want to reduce work hours or stop working (even if you could keep your job). You may even want to fulfill a life dream, like taking an amazing vacation before your illness progresses to the point when it is impossible to travel.

When you are sick, you should be able to fulfill your goals and dreams, and get the medical help you need. Critical illness cover insurance gives you the money to do what you want.

How much cover do you need?

Insurers offer different amounts of cover for critical illness cover. For example, some insurers will cap your coverage at $500,000, while others have higher or lower caps. You should think about the amount of money you will need to get necessary medical care and fulfill your goals if you get sick. Remember, though, that your premiums are directly affected by the policy benefit amount. A higher lump sum payment at the time of a critical illness means you will pay higher premiums to buy the policy.


What does critical illness insurance cover?

Critical illness insurance pays out your lump sum benefit upon diagnosis with a covered condition. You will need to refer to the insurance policy to see exactly what conditions will make you eligible to receive benefits.

Critical illness insurance policies generally pay out upon a diagnosis of cancer; after a stroke; if you have a heart attack; or if you need open chest surgery, bypass surgery, or triple vessel angioplasty. You may also find coverage in case of a diagnosis of Parkinson’s disease, Muscular Dystrophy, or Multiple Sclerosis. Kidney, liver, and lung failure or a transplant of a major organ are also included in many critical illness policies as well.

How does critical illness cover differ from other types of coverage?

Critical illness insurance pays out whenever you are diagnosed with a covered condition, while other policies like income protection insurance pay benefits only if your illness makes you unable to stay at your job.

Critical illness policies are also different from a traditional life insurance policy because your life insurance coverage pays out a death benefit when you pass away while critical illness benefits pay out while you are alive.

Is there a waiting period before you get coverage?

Most critical illness policies have a waiting period before you are fully covered. For example, you may not receive your lump sum payment of you are diagnosed with certain conditions like cancer within the first 90 days after your policy takes effect. Waiting periods are designed to ensure you do not purchase a policy after you begin showing symptoms of a serious health problem.

Who is eligible for critical illness cover?

Healthy Australians are generally eligible for critical illness cover, although insurers may impose restrictions on age. You will need to provide details on your medical status, and on your family medical history and your lifestyle, to determine both eligibility for coverage and the cost of premiums for your policy.

How can you buy critical illness cover?

You should purchase critical illness cover when you are still healthy and before a diagnosis of a serious condition. Determine the coverage amount you want and then shop around for policies. Compare costs and benefits among insurers, including comparing what types of medical conditions and diagnoses will make you eligible for your lump sum benefits payment from your insurer.

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