There is typically a place for both life and critical insurance in the armoury associated with defences for the continuation of regular family life following the death of one of it’s breadwinners or various other providers. Understanding where each of these varieties of insurance fits, however , is probably paid back by a closer comparison of the 2.
Life insurance is conventionally probably the better known of the two. It operates on the simple and straight forward principle that the death of a family member will probably leave the survivors with costs leading to potential financial hardship. Certainly, this way of saving for this kind of expenses – first and foremost the costs of simply according the deceased a respectful burial – mainly took off during the latter part of the 19th century and the growth of many “friendly societies” offering just this form of preserving for those inevitable expenses. These recognised not the risk of death so much as the eventual inevitability and so was given the title of life assurance (an assured sum paid out when the covered person died) rather than a risk orientated life “insurance. ”
As the principle developed, however , it was realised it turned out possible to introduce an element of risk assessment if the premiums paid would be to provide a cash benefit in the event of the insured’s death during a certain amount of tme – this became referred to as insurance term and, so , term life was born.
This development allowed people with commitments to any dependents to make sure against the risk of their dying just before their time – within an insured term – therefore not departing their dependents financially in the lurch.
Critical illness insurance
To compare lifetime and critical illness insurance, it may typically be helpful to see the latter like a further refinement of the former. It is not just the death of the insured person who may leave the surviving dependents in financial hardship. If a critical illness is diagnosed, the inability to work or maybe the need for specialist medical care, can also get their toll on the family financial situation. Critical illness insurance, therefore , is also typically based on the payment of a normal, monthly premium, in return for which the insurance provider pays out an agreed lump sum benefit in the event of a defined “critical illness”.
If a critical illness is identified, therefore , the insured and his or her family have the comfort associated with knowing that additional cash is become forthcoming to use as an alternative source of general income, to make needed alterations to the family home in order to accommodate any actual physical disabilities, or to hire the medical or care staff needed to help the critically ill person.
Since different insurance policies define a “critical illness” in a wide range of ways – some relatively limited and restricted; some with a much wider presentation – it is important to understand very carefully precisely which illnesses are covered in a policy you intended to buy.
In conclusion, life and critical insurance might be something to consider if you are worried about leaving behind those you love behind in a condition of financial worry.
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David Thomson is Chief Executive of BestDealInsurance a totally independent specialist broker dedicated to providing their clients with the best insurance policy deal.