Critical Illness Insurance (Dread Disease)

Concept

Critical illness insurance pays a single lump sum to the insured upon diagnosis of a serious illness exhaustively listed in the contract — typically cancer, heart attack, stroke, or certain other life-threatening conditions — regardless of whether, or to what extent, an actual loss of income or treatment costs are incurred.

Distinction from Disability Income Insurance

Unlike disability income insurance, which is tied to the loss of the ability to work and provides ongoing annuity payments, critical illness insurance is tied exclusively to the medical diagnosis of one of the illnesses defined in the policy wording and pays a single lump sum, regardless of the actual impact of the illness on the insured’s ability to work.

Importance of the List of Covered Conditions

Because the benefit is strictly tied to the medical conditions defined in the contract and their respective diagnostic criteria, the precise contractual definition of the list of covered conditions is of central importance; illnesses that do not exactly meet the contractual diagnostic criteria do not trigger a benefit obligation even in the case of a severe disease course, which is why as comprehensive and clearly worded a list of covered conditions as possible is of considerable importance for the coverage provided.