Though life insurance and critical illness cover are both there to help loved ones financially when you are no longer able to, there are significant differences. Understanding these differences can help you to decide whether you need life insurance, critical illness cover or both.
Should You Choose Life Insurance or Critical Illness Cover?
- Life Insurance – The aim of life insurance is to protect your loved ones financially should you pass away, at which time a claim can be made and the agreed sum would be paid out. The amount paid out often relates to your annual income and it can be used to repay debts, such as a mortgage. It is there to ease the financial challenges loved ones are likely to face without your income. With a designated payout, life insurance can also take care of your dependants and their future. Life insurance payouts go to the beneficiaries detailed in the policy and you can stipulate the percentage that beneficiates will receive. Life insurance policies are fairly broad and there are very few scenarios where claims would be unsuccessful.
- Critical Illness Cover – Life insurance focuses on what would happen in the event of your death, but critical illness cover focuses on what would happen in the event of a critical illness. The aim of critical illness cover is to cover the loss of your income and any debts whilst you recover. It can be used to pay for medical treatment, as well as any home renovations needed to aid with your recovery. Whereas life insurance covers a wide range of instances where death may occur, critical illness cover is not quite as broad. Critical illness cover is only paid out if you are diagnosed with an illness outlined in the policy, such as cancer or a stroke, and different policies cover different illnesses. As a critical illness payout is paid whilst you are still alive, you have full control over how the funds are used.
If you are unsure about whether to choose life insurance or critical illness cover, discuss the options with your insurance broker. An insurance broker can help to determine whether you need life insurance, critical illness cover or a policy with both. At Hawke Financial Services, our experts are on hand to offer professional and accurate advice. Contact us today to speak to an insurance broker.