Critical illness insurance, also called ‘trauma insurance’, is a type of life insurance that can pay a lump sum amount if you suffer a specified critical illness or a specified serious injury. The types of critical illness events that are covered are listed in the insurer’s PDS and can include things like cancer, a heart condition or stroke. What will and won’t be covered will depend on the insurer you choose and what they include under their definition of “critical illness event.”
What is critical illness insurance for?
Critical illness insurance is designed to be used for medical costs, paying any outstanding debt if the event impacts your work (like a mortgage or car loan), the cost of care, therapy or rehabilitation and any adjustments that may need to be made to your home or transport. There are no rules around what it can be used for, and it’s up to you and your family on what the lump sum payment is most useful for.
How can I get critical illness insurance?
Critical illness insurance can be purchased as a stand-alone cover, or like with Medibank Life Insurance, it can be an add-on to life insurance. The key difference being, unlike in stand-alone cover, your life insurance sum insured can be reduced by your critical illness insurance benefit if it is paid. Premiums will also typically be lower if the critical illness insurance is an add-on to your life insurance policy, rather than a stand-alone cover.
You can choose an amount of cover for critical illness insurance, which will impact the cost of your premiums. For Medibank Critical Illness Cover, you can choose between $50,000 and $1,000,000 in cover (depending on your age). Other insurers may offer less or more cover, and the premiums you pay will reflect this change.
Many insurers like Medibank Life Insurance will provide the option to sign up online or over the phone.
Why might I need critical illness insurance?
Depending on your own circumstances, critical illness insurance could help you and your family by providing funds at a time of need if you’re diagnosed with a specified critical illness. The funds can help with the cost of treatment so you can focus on your recovery.
It’s estimated that in 2024, there will be 169,000 cases of cancer diagnosed – an increase of 93% in 24 years. While in 2024, 45,785 Australians suffered a stroke, which is an all-time high. The amount of Australians impacted by critical illness events is growing, and different forms of life insurance can be used to help provide some cover if a terrible event was to happen.
It’s worth considering:
- Do you have enough savings to help cover your bills or cost of living expenses if you had to take an extended period off work?
- Do you have other insurances like income protection or life insurance that could provide a level of cover for lost income?
- Your level of cover for private health insurance or other related insurances that could help cover medical expenses.
- The support you could have from friends and family.
Is critical illness the same as total and permanent disability or terminal illness?
While critical illness insurance, and total and permanent disability insurance can have some similarities, there are some key differences between them and how they may be paid.
Critical illness insurance
This insurance refers to a specified critical illness event occurring, that depending on the insurer, can include things like a heart attack, cancer, stroke or major head trauma. The insurance is triggered by one of these critical illness events happening, and you are then paid a lump-sum as long as the severity of the events meet the policy definitions.
Total and permanent disability insurance
TPD insurance can help provide cover for your income, cost of living expenses or medical expenses if you were to become totally and permanently disabled, leaving you unable to work in any job you’re suited for. The definition of totally and permanently disabled can differ, so it's best to confirm the claim requirements of each product. Like critical illness insurance, it is paid as a lump sum and there are no rules around the ways you can use it.
Terminal illness benefit
Terminal illness insurance is referring to a benefit that’s typically included with life insurance policies. For Medibank Life Insurance policies, a Terminal Illness Benefit is an advance payment of the Life Cover benefit amount (the amount you’d receive if you passed away) if you’re diagnosed with a terminal illness with a life expectancy of under 12 months.1
A critical illness event may also result in a terminal illness diagnosis. If it’s a combined insurance, like an add-on to a life insurance policy, the critical Illness insurance amount paid will reduce the life insurance sum insured, meaning the maximum amount that can be claimed is generally the life cover sum insured. This is dependent on the insurer that you choose.
How much critical illness insurance could I get?
Depending on the insurer you choose, you could get coverage of over $1 million or as little as $50,000. How much cover you get can depend on your age, many insurers will not offer critical illness insurance or trauma insurance for people over a certain age. With Medibank Life Insurance, you can apply for Critical Illness Cover up to your 56th birthday.
How much does critical illness insurance cost?
The amount of critical illness insurance you select will largely influence the cost of your premiums. There are a number of other factors that can affect your premiums, such as your age, your smoker status and any medical information you may have at the time of your application.
As an example, a 35-year-old male, non-smoker accountant could pay $29.96 per fortnight for $1 million in Life Cover with Medibank Life Insurance. Adding $500,000 in Critical Illness Cover would cost an additional $43.70 per fortnight.2 Please note that these figures are indicative and meant to be used as a guide. To receive a quote tailored to your specific circumstances, you can request a personalised life insurance quote.