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Critical illness insurance usually pays a one-time lump sum if you’re diagnosed with a covered illness, such as some cancers, a heart attack or a stroke. You decide how to use the money. Which illnesses are covered, and how each one is defined, depends on the policy.
How it works
- It typically pays a lump sum after you’re diagnosed with a covered critical illness.
- The amount depends on the coverage you choose.
- Covered illnesses often include cancer, Alzheimer’s disease, heart attack and stroke.
- Insurers define critical illnesses differently and cover different lists of conditions.
What people use the money for
You decide. Examples include childcare, making your home more accessible, or covering bills while you recover.
How it differs from disability insurance
Disability insurance replaces part of your income, usually monthly, while you can’t work. Critical illness insurance typically pays a lump sum after diagnosis of a covered illness.
Questions to ask before you buy
- Which conditions are covered, and how is each one defined?
- Is there a waiting period, or a period I must survive after diagnosis, before it pays?
- Are any conditions I had before applying excluded?
- Read the policy carefully before you sign.
Side-by-side
An example
Someone is diagnosed with a covered illness and takes several months off work. A lump sum could pay for childcare and home changes, while disability coverage, if they have it, helps replace part of their pay. Whether a claim is paid depends on the policy’s definitions and terms.
Put it into numbers
FAQs
Is critical illness insurance the same as health insurance?
No. It doesn’t pay your medical bills directly. It pays you a lump sum to use however you need.
Does my mortgage lender’s critical illness coverage work the same way?
Not exactly. Coverage sold with a mortgage usually pays toward the mortgage, and pre-existing conditions are usually not covered. See our guide on lender insurance vs. your own policy.
Can I have both critical illness and disability insurance?
Yes. They pay for different things and can work together.
Sources
General information only, not advice for your situation. Coverage depends on each policy's terms, conditions, limitations and exclusions.