Disability insurance vs. critical illness insurance: Which is better for you?
If you're trying to decide between disability insurance and critical illness insurance, you may want to consider getting both. They don't offer the same kind of coverage, so choosing one could leave you unprotected in other areas of your life. Here's what you need to know about the differences between the two types of insurance.
What does disability insurance cover?
Disability insurance is designed to financially help you when you're unable to work due to a covered injury or illness. The benefit provides a percentage of your income for a set period of time, allowing you to focus on getting back on your feet without extra financial stress.
To receive your benefit, you may need to provide proof that you can't work and need to "re-prove" this status upon request from your insurance provider. If you improve to the point that you no longer meet the definition of disabled through your disability insurance policy, your payments will end.
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What does critical illness insurance offer?
In contrast to disability insurance, critical illness insurance does not cover injuries. Instead, it provides a lump sum payment if you're diagnosed with any illnesses covered on your policy. The diagnosis of illness is the most important factor here, as opposed to whether it keeps you from working. Once the illness has been diagnosed, and you've received your benefit payment from the policy, you won't generally be asked to prove whether you can or cannot work.
Additionally, critical illness insurance isn't based on your income. The maximum benefit amount you'll receive for your illness is detailed in your policy document. Some conditions will provide a bigger benefit than others, and before you choose a policy, you'll want to see what the benefit amounts and covered illnesses are. For example, while a family history of heart disease doesn’t guarantee you will also get it, it’s worth considering if it’s covered in your policy.
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So, what's the bottom line?
The bottom line when comparing disability insurance and critical illness insurance is that one isn't a replacement for the other. One option also isn't necessarily better than the other. They provide different types of coverage and having both may give you more protection and additional peace of mind.
This blog is up to date as of May 2022 and has not been updated for changes in the law, administration or current events.