What is critical illness insurance?

What is critical illness insurance?
Changing jobs is a great time to review your insurance needs says Sean McCormack, general manager of advice product and Bancassurance at insurance provider MLC.

Mr McCormack says people should kick start their review with some basic questions such as ‘what would I do if I suffered from a prolonged illness? Would I be able to adequately cover my expenses and associated medical costs? How much would I need?’

“Critical Illness insurance” or “CI” covers the insured person for a lump sum upon their diagnosis with an illness from a defined list, which may include cancer, coronary disease and diabetes.

“This type of insurance provides financial relief from the additional expenses incurred following diagnosis with a critical illness, allowing those diagnosed to get on with what’s really important – getting well,” Mr McCormack says.

Research conducted by MLC found that one in 10 Australians do not know how much money their family would need if the main income earner was unable to work due to a serious illness. Of those surveyed, 55 per cent believed their household would need up to $500 000. The average cover people actually hold in CI insurance is $242 500.

MLC claims the shortfall in cover and in many cases, absence of cover, did not fit well with the prevalence of critical illnesses in Australia include cancer. According to the Cancer Council, a third of all women and a quarter of all men will suffer cancer at some stage in their lifetime. MLC’s research found only one in 10 people held CI insurance at the time of its research.

CI insurance also offers cover for the insured while travelling overseas.  For example, if you fall critically ill while away from home, you will still be covered.  However unlike accident insurance which exists for the smaller things and helping you get back home, CI insurance is there for the longer term impacts of a critical illness.

Mr McCormack says the amount of insurance required differs from person to person. However if someone does get ill the CI cover is an alternative to tapping into savings or turning to family members to help out.  For example, if the primary income earner in a family became ill the CI cover “provides immediate relief” so the secondary earner does not have to increase their hours or worse, sell the family home.

Also, MLC’s research found that of those who didn’t have CI insurance, the majority were aged between 25-34 years old (33 per cent) and not married (36 per cent). A common misconception among the young, free and single, is that they don’t need CI insurance because they don’t have any dependents. This couldn’t be further from the truth. For those that are young and or single, CI insurance provides continued financial independence should they fall ill through a lump sum payment enabling them to continue living an independent lifestyle while they recover.

MLC’s research found that almost half of those surveyed who didn’t have CI insurance (46 per cent), believed it was too expensive. Mr McCormack says the reality is that the cost of CI insurance can be as little as $3per day, which is less than a cup of coffee.

Visit the MLC For more information go to MLC website.