Critical illness insurance , otherwise known as critical illness cover or fear fraud policy , is an insurance product in which insurance companies are contracted to normally make cash payments at once if the policyholder is diagnosed with one particular disease on the list that has been determined as part of the insurance policy.
This policy can also be set up to pay for regular income and payments can also be provided to policyholders who undergo surgical procedures, for example, heart bypass surgery.
This policy may require policyholders to survive the minimum amount of days (life span ) when the disease is first diagnosed. The lifespan used varies from company to company, however, 14 days is the most commonly used survival period. In the Australian market, the survival period is set between 8 - 14 days.
The contract terms contain specific rules that determine when a critical illness diagnosis is considered valid. It may suggest that a diagnosis needs to be made by a physician who specializes in the disease or condition, or may mention specific tests, eg ECG myocardial infarction, which confirm the diagnosis.
But in some markets, the definition of claims for many diseases and conditions has become standard, so all insurance companies will use the same claim definition. Standardization of claim definition can serve many purposes including enhancing clarity of cover for policyholders and greater policy comparisons of various office life. For example, in the UK, the British Insurers Association (ABI) has issued the Best Practice Statement which includes a number of standard definitions for common critical illnesses.
There are alternative forms of critical illness insurance for cash lump sum payment models. This critical illness insurance policy directly pays healthcare providers for critical and life-threatening illness treatment costs covered by insurance policies of policyholders, including specialist fees and procedures at selected high-ranked hospitals to a certain amount per treatment episode as set out in policy.
Video Critical illness insurance
The first critical illness product
Critical illness insurance was founded by Dr. Marius Barnard, with the first critical illness product launched on October 6, 1983 in South Africa, under the name frightened disease insurance .
Since 1983, the cover has been accepted into many insurance markets around the world. Other names of insurance include: trauma insurance , serious illness insurance and life insurance .
Maps Critical illness insurance
Closed condition
The schedule of insured diseases varies between insurance companies. In 1983, four conditions were covered by policy, namely heart attack, cancer, stroke and coronary artery by-pass operation.
Examples of other conditions that may be covered include:
Ref: Canada Life Critical Illness Insurance Policy
Due to the fact that the incidence of a condition may decrease over time and both diagnosis and treatment can increase over time, the financial need to cover some of the diseases considered critical a decade ago is no longer considered necessary today. Likewise, some of the conditions covered today may no longer be needed a decade or more in the future.
The actual conditions covered depend on the needs of the market for protection, competition between insurers, and the value of holders of perceived policies offered. For this reason conditions like diabetes and rheumatoid arthritis, among others, can be a cover of the norms provided in the future.
Need for critical illness cover
Critical disease cover was initially sold for the purpose of providing financial protection to individuals after diagnosis or treatment of the diseases considered critical. Critical illnesses can be purchased by individuals in relation to life insurance or long-term insurance policies at the time of purchase of a residence, known as a 'bolt-on' benefit.
Acceptable finances may be used to:
- pay maintenance and care costs;
- pay for recovery assistance;
- to replace lost income due to the ability to earn a declining income; or even
- fund lifestyle changes.
This insurance can provide financial protection to policyholders or their dependents on repayment of the mortgage because the policyholder has a condition of critical illness or the death of the policyholder. In this type of product design, some insurance companies may choose to structure the product to pay some of the outstanding mortgage debt on contracting a critical illness, while the entire mortgage debt will be paid off at the death of the policyholder. Alternatively, total sum insured can be paid for the diagnosis of critical illness, but then there is no further payment of death, effectively making critical illness payments 'accelerated death payments'.
Some employers may also take critical illness insurance for their employees. This contract will be in the form of group contracts and has become an important strategy used by companies around the world to protect their employees financially as well as attract more employees to consider working for the company.
Alternative forms of critical illness insurance
A typical critical illness insurance product refers to a policy in which the insurer pays to a predetermined cash payment policy holder if the policyholder is diagnosed with a critical illness listed in the policy. However, alternative forms of critical illness cover provide direct payments to healthcare providers to cover high medical costs in treating critical illnesses such as cancer, cardiovascular procedures and organ transplants. The maximum amount is set in the insurance policy and is determined per treatment episode.
This critical illness insurance product generally pays the hospital directly to avoid expenses incurred by the policyholder and the long replacement process. In most examples of these alternatives to critical illness loss insurance, policyholders may decide where they will receive treatment among previously selected hospital groups.
Some forms of critical illness insurance also offer the option of policyholders to travel to highly specialized hospitals in other countries to receive treatment. This policy usually includes travel and accommodation expenses for policyholders and escorts, as well as other concierge services such as translators or private nurses.
Assess risk
Applicants are assessed for risk by the underwriting process. Underwriting can be done in automated underwriting computer filtering systems. But the most detailed and holistic underwriting is still done by experienced life insurance underwriters.
The underwriting process for critical illness is similar to life insurance because it takes into account factors such as age, gender, smoking status, past medical history, family history, alcohol consumption, and body mass index. However, in the case of critical illness, there is an increased emphasis on family history, smoking, and bodymass indices are risk factors that may indicate a marked increase in risk associated with critical illness closure.
Once the applicant fully covers the shelter, an underwriter may decide to accept risks at the standard level, or they may decide rather than additional fees are justified, or they may decide to apply certain disease exclusions. If there is an amendment by the guarantor for admission requirements, this must be approved by the applicant before the policy can proceed to issue.
World market
In South Africa, Britain, Ireland, Australia and New Zealand, critical illness insurance has become an established form of insurance.
Critical illness insurance continues to grow in popularity and has recently been accepted in other areas including the Far East and the United States.
In markets where products are newer, many insurance companies choose to use reinsurance expertise with worldwide exposure as well as overseas insurance that has sold the product for several years. Expertise can be data provided as well as assistance with product design features of the product.
Australia
Critical Illness Insurance, also known as Trauma Insurance in Australia is marked with a one-off payment for a registered medical event. Unlike in the UK, Trauma Insurance conditions are not standard and market competition is based on premium definitions and policies. Not infrequently Australian Trauma Insurance policy to create a list of 40 definitions, including Cancer, Heart Attack, Stroke. About 85% of Trauma Insurance claims paid in Australia are for Cancer or Heart Disease. Not infrequently the policy also offers a partial payment, if the conditions suffered do not meet the full definition required for payment of full claim.
The Trauma Insurance Policy in Australia is most often associated with Life Insurance policy, but can be considered as a stand-alone policy and where the Trauma Insurance policy is linked, it usually reduces the balance of the insured Life Insurance amount.
The Trauma Insurance Policy in Australia when it is used to provide personal protection, is generally not tax deductible and the outcome of any claim is not taxable. Trauma Insurance is not offered in Superannuation because the definition available for payment is not always in line with the required release requirements.
Canada
Critical illness insurance options available in Canada:
- ROP - Premium return. If you do not claim critical illness, you may request a refund of premiums as long as you have met the minimum time period specified in the policy.
- ROPD - Premium return on Death. Your premium is returned to your property. ROPD is optional
- Term CI - Similar to term life insurance, this critical illness insurance raises the premium cost at the beginning of each new semester. A term is generally 10 years old. Term CI ends at age 75 (varies by insurance company).
- Permanent CI - Permanent critical illness insurance is term level insurance, which means premiums do not change. The permanent CI does not expire unless requested by the client, or fails to pay.
- Second Event. If there is a second critical illness you receive 50% of the policy benefits above and above the basic benefits. The second event is an optional rider.
- Premium exemption. Premiums are waived if you are disabled. Premium exemption is an optional rider.
See also
- Life insurance
- Total permanent disability insurance
- Health insurance
- Health insurance in the United States
References
External links
Source of the article : Wikipedia
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