Critical Illness Insurance – Explained

How Critical Illness Insurance could make a huge difference in your life

We all know someone that has suffered a heart attack, stroke or cancer.  After all, they are the most common reasons people have to claim on their health insurance.  Approximately 21 people have a stroke every day in New Zealand with a quarter occurring in people aged under 65, and over 2800 woman are diagnosed with breast cancer each year.  No one expects it to happen to them, but imagine that you have just found out that you or your loved one has a serious medical condition.  How would you cope financially during the recovery period?  Would the financial stress impact the healing process?  How would your partner cope, and would they be able to support you during your recovery as well as continue with their work?

A critical illness can strike anyone at any time, but with the advances we are seeing in medical technology, we have a far greater chance of surviving a critical illness now than we have ever had in the past.  Many people recover from life-threatening illnesses only to find that their savings are depleted and their earning power is severely reduced.  At that point, a health crisis becomes a wealth crisis, adding even more stress to patients and their families. It is the financial consequences of survival that we are often not prepared for.

Critical Illness Insurance can give you significant financial help if you suffer any one of a number of serious medical conditions.  It allows you to focus your energy on coping with your condition rather than dealing with the day to day demands of others.  It pays a lump sum, tax free benefit, which can make up for loss of earnings (including loss of earnings by a spouse who has to stop working to care for you), meet expenses incurred for treatment, and clear debt which might otherwise be a drain on your finances.

How this type of insurance began

Dr. Marius Barnard, the surgeon who assisted in the world’s first heart transplant, designed and promoted this type of insurance in 1983.  He was motivated by the financial hardship he saw his patients suffer after he had treated their critical illnesses, and convinced South African insurance companies to introduce a new type of insurance to cover them.  He argued that, as a medical doctor, he could repair a man physically, but only insurers can repair a patient’s finances.  He believed that people need Critical Illness Insurance, not because they were going to die, but because they were going to live.

From my perspective…

As we age we are unfortunately more likely to suffer from one of the common critical illnesses.  Often our children have grown-up, the mortgage has been reduced or cleared and we think we are home-free.   However it could take 6-12 months, or even longer, to recover from a health set-back and you probably won’t be working or earning a living during this time.  As a Financial Adviser, I have seen first-hand the positive impact that a lump sum payment can have for families.  They have been able to take advantage of alternative treatments that are not covered by their health insurance or travel to another country to obtain the special treatment they desired.  The payment has also been used for essential home alterations.  Knowing they had a lump sum payment that they could spend on anything they needed was, in short, a lifesaver.

If you haven’t thought about getting this type of cover before, it is well worth considering.  The benefits are significant and can make all the difference if you ever need to fall back on it.  It’s so important to ensure you have the right protection in place.