FAQ - Critical Illness

Why should I consider buying Critical Illness Cover?

• You should ask yourself the question, would I or any of my dependents face financial difficulty when I become critically ill? If the answer to this question is yes, then you should consider buying Critical Illness Cover. Critical Illness Cover aims to give you peace of mind in these circumstances.

Which critical illnesses are covered?

• Different policies cover different critical illnesses. The critical illnesses that are covered by the insurance company will be listed in your policy document.
• You should keep in mind that the heading of each critical illness is only a guide to what is covered. The full definition under each heading will indicate what your policy covers.
• The model definitions are generally grouped into “Core” and “Comprehensive” conditions. The “Core” conditions are usually the critical illness most likely to happen.
  Cancer
  Stroke
  Coronary Bypass
  Myocardial Infarction

What types of policies are available?

• You can choose Critical Illness cover as a standalone product or you can select Critical Illness cover as an additional benefit to your life insurance policy. This usually means that the policy pays out if you suffer a critical illness. These plans generally pay out a once off lump sum value.

Can I purchase whole of life Critical Illness cover?

• No. Critical Illness cover normally has a maximum benefit end date of sixty five (65) years of age. This means that cover will cease before the life assureds sixty fifth (65th) birthday.

Should I buy a policy where the premiums do or do not increase year on year?

• It depends on why you are buying the insurance. If you only expect to need the coverage for a few years, until your mortgage is paid off or your child finishes college, for example, a rising premium policy (one where the premiums increase as you get older) would be appropriate and would minimize your immediate outlay of money. You could then consider dropping the coverage when you no longer need it. Increasing premiums might also be appropriate if you expect to have much higher income in a few years and you want to minimize the cost in the first few years.
• On the other hand, if you will need Critical Illness insurance for many years (say, until you retire) you should consider a level premium policy. Here you will be paying somewhat more in the early years to keep the premiums from rising as you get older.

Do I need to use my proceeds for paying my medical cost or settling debt?

• How you use your benefit is entirely up to you. It may indeed be used for paying your medical cost or for settling debt. It can also be utilized to pay for childcare or basic living expenses.
• Critical Illness policies give you the time to come to terms with your condition and decide what changes you want or need to make to your life.

What should I look for when buying Critical Illness Cover?

You should follow the following pointers:

• Read the small print to get an understanding of what you are buying and what is covered.
• You want a product that will pay a lump sum should you suffer from one of the diseases covered.
• Check whether premiums are fixed or can be increased by the insurance company every few years after a review.
• All insurers should provide you with a schedule of the key features of the product that you purchase.
• Enquire whether an assessment or payment deferred period exists on the product.

Are the proceeds from a Critical Illness policy taxable?

• The proceeds from a Critical Illness policy are not taxable because of its nature. The proceeds are of a capital nature and are therefore not taxable as income. All proceeds that are of a capital nature are subject to Capital Gains Tax. However, the proceeds from a Critical Illness policy are exempt from Capital Gains Tax.