Different types of insurance policies are designed to protect us from various unexpected life events. One of these types are critical illness insurance. The primary purpose of critical illness insurance is to provide you with financial support if you’re ever diagnosed with a critical illness. However, what happens if you were to pass on? Would it offer any pay-out? In this article, we’ll explore whether critical illness insurance includes a death benefit and, in some, cases, where it might be available.
Key Takeaways
- What Critical Illness Insurance is and the purpose of having it
- How Critical Illness Insurance differs from Life Insurance
Understanding Critical Illness Insurance
It’s time to get a basic understanding of Critical Illness Insurance. This type of coverage is designed to provide a lump-sum payment to policyholders who are diagnosed with a critical illness covered by their policy. According to a Dread Disease Survey by Gen Re published in 2022, the most common critical illnesses are cancer, heart attack, and stroke1. The funds received can be used for various purposes, such as medical expenses, paying off debts, or even taking a much-needed vacation during recovery.
The Focus on Survival
Critical illness insurance is primarily structured to provide financial assistance during life-threatening health crises. Therefore, it doesn’t typically offer a death benefit in the same way that life insurance does. In other words, the policyholder may not receive a pay-out if they pass away without having suffered a covered critical illness.
What Happens if You Die?
If you’re insured and covered by a critical illness insurance, but you’ve passed away due to reasons unrelated to the critical illnesses covered in your policy, the policy will typically not pay out a death benefit. Instead, the coverage will usually terminate, and the insurance company does not provide any funds to the beneficiaries.
However, it’s worth noting that there are exceptions. For instance, Tiq 3 Plus Critical Illness not only covers stroke, heart attack, and all stages of cancer, it also offers a $20,0002 death benefit for you and up to 4 of your children. This is an additional feature that enhances the overall value of your critical illness insurance policies.
Related Article: Is a Critical Illness Plan Covering Only Cancer, Stroke, and Heart Attack Enough?
How Critical Illness Insurance Differs from Life Insurance
It’s important to understand the differences between critical illness insurance and life insurance. While both types help provide you with financial security, they serve their own distinct purposes.
Life insurance pays out a death benefit to the beneficiaries of your policy when you pass on. This is regardless of the cause of death. It offers peace of mind that your loved ones will be financially protected when you are no longer there to provide for them. Some people chose to cover funeral expenses, outstanding debts, and the long-term financial well-being of dependents with the life insurance pay-out.
On the other hand, critical illness insurance focuses on your well-being while you are alive and battling a critical illness. It provides financial assistance during a time when hidden costs arising from critical illness, and other expenses can skyrocket. This type of coverage ensures that you have the necessary funds to cover your treatment and maintain your quality of life during recovery.
Scenarios and Examples
Let’s consider a few scenarios Joanna may face when purchasing a critical illness or life insurance policy to illustrate the difference between them:
Scenario 1: Critical Illness Insurance
Imagine Joanna has critical illness insurance, and she’s diagnosed with stage 3 cancer. Her policy covers cancer as a critical illness. She receives a lump-sum payment from her insurer, which she uses to pay for her treatments, medical bills, and other expenses related to her illness. Fortunately, she recovers and returns to good health, hopefully with minimal impact to her financial well-being.
Scenario 2: Life Insurance
Picture that Joanna has a life insurance policy. Tragically, she passes away suddenly in a car accident. Her beneficiaries receive the death benefit from her life insurance policy, providing them with financial support to cover funeral costs, pay off debts, and maintain their standard of living.
Related Article: When Should You Buy Term Life Insurance?
Scenario 3: No Critical Illness Diagnosis
In this scenario, Joanna has critical illness insurance that covers a list of critical illness conditions. It doesn’t offer death coverage if she passes away due to reasons unrelated to critical illnesses covered by the policy. She never experiences a covered critical illness during the policy term. If she were to pass away due to any cause not covered by her critical illness policy (e.g., a heart attack), there would be no death benefit payable
In the case when you are covered by Tiq 3 Plus Critical Illness, even if you do not experience a covered critical illness during the policy term, if you were to pass on, you will still receive a death benefit of $20,000 one-off lump sum pay-out and the policy will terminate.
In summary, not all critical illness insurance includes a death benefit. Its primary purpose is to provide financial support when you are diagnosed with a covered critical illness. If you pass away due to unrelated causes, the policy generally does not pay out any benefits. However, there are exceptions, like Tiq 3 Plus Critical Illness with a death benefit as part of their critical illness insurance coverage.
Related Article: How Do I Buy The Right Critical Illness Insurance?
Understanding the distinctions between critical illness insurance and life insurance is crucial when planning your financial security. Consider your unique needs and goals to determine which type or combination of insurance is right for you and your loved ones.
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1Gen Re – “Dread Disease Survey (2015 – 2019)”, published in 2022
2Plan Benefit – Death Benefit and Conditions of Cover: Tiq 3 Plus Critical Illness Product Summary
Information is correct as of 06 October 2023. This policy is underwritten by Etiqa Insurance Pte. Ltd (Company Reg. No. 201331905K). This content is for the reference only and is not a contract of insurance. Full details of the policy terms and conditions can be found in the policy contract. You should seek advice from a financial adviser before deciding to purchase the policy. If you choose not to seek advice, you should consider if the policy is suitable for you. As this product has no savings or investment feature, there is no cash value if the policy ends off if the policy is terminated prematurely. This policy is protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit us the Life Insurance Association (LIA) or SDIC web-sites (www.lia.org.sg or www.sdic.org.sg). This advertisement has not been reviewed by the Monetary Authority of Singapore.
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