Also known as critical illness cover or dread disease policy, critical illness insurance is one whose policy mandates that, if the insured is diagnosed with any one of predetermined diseases, the insurer come to the financial aid of the insured in terms of health care. The criteria by which the validity of the diagnosis of a critical illness is determined is also part of the contract.
The risk of the insured getting critically ill is firstly assessed by the insurer considering such things as habits of the insured that can have effects on their health. Assessment conclusions may then warrant extra charge on the insured. The insurer may also require that the insured survive a minimum number of days after diagnosis. This period of time is referred to as the survival period.
Although, aid is typically rendered by lump sum cash payment, alternative payment forms also exist. The insurer may, for example, pay directly to health providers or provide full sponsorship to receive treatment abroad.
Critical illness insurance is well established in South Africa, Australia, the United Kingdom, New Zealand and Ireland, and is increasingly becoming popular in other territories including the far east and the US.