Critical illness insurance may appear in different forms. Let’s have a look at acceleration benefit and standalone benefit rider.
Acceleration benefit can be in most of the case life insurance related critical illness. This type of policy may award full or part of the total sum insured in the event that a critical illness occurs. The critical illness sum insured may then be paid out as a tax free lump sum. The value of the critical illness benefit may be given as part of the life sum insured. It can usually be the whole life sum insured or around 50 percent but any other rate can be fixed at the start of the policy. When the sum had been paid due to critical illness, the total sum may be reduced by the amount paid. As a matter of fact, the premium rates may also decrease.
In this connection, there may be other flavours of acceleration benefits. This may heavily depend on insurance companies and how they design their products. For example, there may be life insurance policies which may automatically include critical illness cover. Other product designs may have critical illness cover combined to life rider under a main policy. Therefore, in the event of critical illness, a prepayment may be made on the life rider and the main policy may be kept ongoing. For example an endowment policy combined with a life and critical illness rider. Should a critical illness occur, a sum may be paid on the life rider while the endowment policy may remain in force.
Standalone benefit rider
The standalone benefit rider may provide a benefit or lump sum in the event that a critical illness occurs. In contrast with acceleration benefit, the sum insured on the main policy may be left unchanged. It can also be possible to receive the critical illness payout in three to five installments. For this cover, the insured person may be required to stay alive for a short period of time. This can be called the survival period and the waiting time may be around two weeks after which the critical illness benefit may be awarded.
Moreover, critical illness cover products may still be offered as a prepayment benefit around the world nowadays. Especially, critical illness cover may be joined with life, term or endowment insurances. The diseases that a critical illness insurance covers may be the most common causes of death. Therefore, the idea of a prepayment can mean that it is a form of benefit that may be paid at a later moment. Another advantage of prepayment can be that while a payment is made due to critical illness the main policy may be decreased by a similar amount. This can be important in regards with endowment or whole life policies where sufficient funds may remain until the duration of the policy. For example, if half of the total sum for a life insurance is not paid, the insured person may still have life insurance after a critical illness claim is paid.
Prepayment can therefore be a wise option to have on a critical illness cover. The complexity of critical illness cover may demand a lot of attention especially when you are going to be a first time buyer.
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