Does Critical Illness Have A Death Benefit?

Shawn Plummer

CEO, The Annuity Expert

Does Critical Illness Have A Death Benefit?

Critical illness insurance typically does not include a death benefit in the same way life insurance does. Its primary purpose is to provide a lump sum payment to the policyholder if they are diagnosed with a critical illness covered by the policy, thereby functioning as a living benefit. This financial support is intended to help cover expenses related to the illness, such as treatment costs, lost income, or other related expenses.

Some critical illness policies may offer an added accidental death benefit rider. This rider is an optional add-on that provides additional coverage in case of death due to an accident. However, without this rider, a standard critical illness policy does not pay a death benefit upon the policyholder’s death. It’s essential to carefully read the terms and conditions of the policy to understand the coverage and any additional riders available.

Key Differences Between Critical Illness and Life Insurance

  1. Purpose:
    • Critical Illness: Provides a lump sum for living expenses upon diagnosis of a critical illness.
    • Life Insurance: Pays a death benefit to beneficiaries upon the policyholder’s death.
  2. Benefit Trigger:
    • Critical Illness: Diagnosis of a covered critical illness.
    • Life Insurance: Death of the insured.
  3. Optional Riders:
    • Critical Illness: May include accidental death benefit rider.
    • Life Insurance: This can include various riders like accidental death or waiver of premium.
  4. Use of Funds:
    • Critical Illness: Typically used for medical expenses, income replacement, or other related costs.
    • Life Insurance: Often used for final expenses, income replacement for beneficiaries, or inheritance.
  5. Coverage Duration:
    • Critical Illness: Often limited term, covering specific illnesses.
    • Life Insurance: This can be term or whole life, providing lifelong coverage.

Related Reading: Does critical illness insurance have cash value?

Conclusion

Critical illness insurance primarily serves as a living benefit, offering financial support upon diagnosis of a critical illness. An accidental death benefit rider can add a death benefit component, but it is not inherent to standard critical illness policies. Understanding the specific coverage and options of your policy is crucial for effective financial planning. Contact us today for a free quote.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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