Critical illness insurance or critical illness coverage is an insurance product where the insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the critical illnesses listed in the insurance policy. The payout may also be made if the policyholder undergoes a surgical procedure, for example, having a heart bypass operation.
The policy may require the policyholder to survive a minimum number of days (the survival or waiting period) from when the illness was first diagnosed. The survival period used varies from company to company, however, 30 days is the most typical survival period.
The contract terms contain specific rules that define when a diagnosis of a critical illness is considered valid. It may state that the diagnosis need be made by a physician who specialises in that illness or condition, or it may name specific tests, e.g. EKG changes of a myocardial infarction, that confirm the diagnosis.
In some markets, however, the definition of a claim for many of the diseases and conditions have become standardized, thus all insurers would use the same claims definition. The standardization of the claims definitions may serve many purposes including increased clarity of coverage for policyholders and greater comparability of policies from different life companies.
The policy may be enhanced with optional benefits such as Waiver of Premium, Return of Premium or Child Critical Illness riders.