Types Of Critical Illness Insurance Coverage
There are many critical illness products in the market (every insurer has at least a few options) and they come in different packages and features. This may make it difficult for you to understand which is the right coverage.
Do You Know?
Critical illness insurance is known by different names including crisis cover, critical care…etc. The easiest way to see if your insurance policy provides critical illness insurance cover is to check your policy contract and see if there are definitions for critical illnesses such as cancer, stroke or heart attack.
In GEN, we group all the different types of critical illness coverage in the market into 3 types and here is a summary of each type:
Type 1: Severe Stage with Standard Definitions
All insurers that offer critical illness insurance coverage start with this type of basic critical illness insurance coverage. The number of illnesses covered is 37 and the definitions are standardised using Life Insurance Association’s (LIA) guidelines.
Type 2: All Stages Cover with Additional Conditions (i.e. Early, Intermediate and Severe + Additional Conditions)
Type 2 is where insurers differ. There are Type 2 critical illness plans that cover only one type of critical illness (e.g. cancer only), a small group of illnesses (e.g. the 3 illnesses that resulted in most claims such as cancer, stroke and heart attack) or even more than a 100 illnesses covered. The key difference as compared to Type 1 is that Type 2 coverage extends beyond the severe or critical stages of an illness as it includes coverage the early or intermediate stages.
Using the example of Major Cancer, the standard definition provided by LIA is:
“A malignant tumour positively diagnosed with histological confirmation and characterised by the uncontrolled growth of malignant cells with invasion and destruction of normal tissue.” In addition, Cancer which is “carcinoma-in-situ” is specifically excluded.
This can result in someone being diagnosed with cancer yet being unable to claim is the cancer is at the “carcinoma-in-situ” stage or when the cancer hasn’t spread.
The coverage for Type 2 is more comprehensive and there are also options for “multiple claims” such as being able to claim more than once for the same illness or different illnesses depending on the plan features and this provides the peace of mind that there is still insurance protection even after making the first claim.
Type 3: Impairment-Based Definitions
This is currently not offered by all insurers and it’s a different approach towards providing coverage for “loss of health”. For Type 1 and Type 2 coverage, the illnesses are defined clearly and the insurance plan can only pay out when one of the illnesses covered is diagnosed. This means that the greater the number of illnesses or conditions covered, the more comprehensive the coverage is. For example, a plan that covers 100 conditions is better than another that covers 80 conditions.
However, if an illness is not defined and by extension not covered, the plan will not pay out even if the illnesses resulted in a significant health impact. An example will be Covid which is not defined in critical illness insurance definitions because it’s a new disease yet for some, it can result in damage to the lungs resulting in permanent impairment. Type 3 critical illness coverage may be able to pay-out if the impairment to lungs meets the definitions.
Some examples of areas where impairment-based definitions can cover includes:
- Cardiovascular System
- Neurological System
- Hepatic System and Liver Function
- Renal System and Kidney Function
- Digestive System
- Respiratory System
- Sensory System