Why is a critical illness cover more expensive than a simple life cover?

Why is a critical illness cover more expensive than a simple life cover?

A life insurance or (should we rather call it) a death cover (as it only pays out on death unless you get diagnosed with something terminal) is designed to pay out a lump-sum (or a monthly income, depending upon your preference) to your family should you die during the term of the policy. So for e.g. if you took out a policy at the age of 40 for a 25 years term, that policy will only ever pay out if you die during those 25 years i.e. before your 65th birthday. Now come to think of it, it is after all only a contingency planning & ideally one shouldn’t expect any money out of it unless the worst was to happen. But then each one of us is different & all of us have a different outlook.

I can tell you there’re people who consider it only as a contingency planning but there’s now another emerging faction that believes in getting a return out of it. Honestly, I am one of them. End of the day, just like any other thing it is also a product I am paying for & if I can ensure that no one ever has to pay for my burials, I’d do it without giving it a second thought. In fact why only just the burials, like many others I’d love to leave money behind for my loved ones.

Hence I’ve done a death policy for myself that takes me to my 90th birthday & I know it’s highly likely that the policy will pay out given the small percentage of people who make it past that age. I know there’re people who go for Whole of Life policies too as that’s a guaranteed pay out. Trouble is, those policies are twice as expensive. But then I feel if you’re planning to go for a life cover, you should always choose between these two options because with them at least you know your family will get something at the end of the day & all that money you’d have paid in will not go down the drain after all.

Apart from death policy there’s one interesting policy which I feel has a long way to go still as over 80% of the people who take out a family protection cover, going by the statistics, only consider a simple life insurance, they don’t want to look beyond. It is what’s known as a critical illness cover. Now the biggest reason why many of us don’t go for it is because of the cost involved. It is usually about 5 – 6 times more expensive than a life cover & that’s because it has 5 to 6 times more chances of paying out. Most of them would cover you for all types of cancers & other conditions for e.g. hearts attack, stroke, MS, tumours, etc. & with cancer being so common these days, I feel one must have a critical illness cover in place. Now a lot of times people get confused between a terminal and a critical illness cover.

The biggest difference between the two is that, a critical illness cover pays out upon diagnosis of that condition, doesn’t matter how severe it is but with a terminal illness it has to be terminal i.e. the doctors should give it in writing that you only have a number of months left to survive. So that ways a critical illness cover is definitely of much more importance as compared to a life only cover.

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