Disability vs. critical illness insurance: What’s the difference?

Protect yourself from Uncertainty:

There are a variety of insurances created to protect yourself from uncertainty. From life insurance to health insurance and long-term care insurance, the list goes on and on. To find out more information, do not hesitate to give SVIC a call today to schedule an appointment.

While disability and critical illness insurance have similarities because they can help you and your family with health and personal difficulties, they have many considerable differences and provide solutions to suit your financial needs.

What is Disability Insurance?

Disability insurance is a monthly payment that replaces some of your income if you can’t work because of an injury or illness. This insurance usually provides you with 60 to 70% of your income so you can financially be stable and maintain yourself until you can return to work.

What is Critical Illness Insurance?

Critical illness insurance provides a one-time, lump-sum payment that you can use any way you want if you experience one of these serious conditions, such as cancer, heart attack or stroke etc. We must understand that not everyone’s recovery costs are the same. In addition, to a leave of absence from your job, critical illness insurance can sometimes mean that you’re left with the costs of recovery. This could include a need for costly assistive devices for your treatment or recovery, or even travel expenses – things disability insurance may not cover.

Differences between a Disability Insurance and Critical Illness Insurance:

  • Payments: 
    • Disability Insurance: The disabled who is insured is subject to a maximum number of monthly payments, as well as a percentage of the current income. Once the insured has other sources of income, the benefits may reduce over time or completely stop.
    • Critical Illness Insurance: Once the insured is diagnosed with a critical illness, he/she is given a lump sum amount. The payment is by no means connected with the persons’ ability to work. He/she may continue to work while they are diagnosed with the covered illness.
  • Waiting Period:
    •   Disability Insurance: There is a waiting period from the time the insured is unable to work.
    •   Critical Illness Insurance: The waiting period is from the date of the diagnosis. The insured must survive the waiting period for the claims to be payable.
  • Reasons for claims to be payable:
    • Disability Insurance: Depends on the type of disability policy:
      • Any occupation: Where the person is unable to find employment for any kind of work.
      • Regular occupation: Where the insured is unable to perform any ordinary occupation due to a medical condition.
      • Own occupation: Where the insures is unable to perform one’s occupation.
    • Disability Insurance: Depends on the type of disability policy:
      • Alzheimer’s disease
      • Heart attack
      • Major stroke
      • Brain tumour
      • Total blindness, deafness, or muteness
      • Major organ transplant
      • Cancer
      • HIV
      • Kidney failure
      • Coma
      • Multiple Sclerosis
      • Parkinson’s disease
      • Third-degree burns
      • Traumatic head injury
  • Length of the coverage
    •   Disability Insurance: Coverage is usually till the age of 65. Benefits start to kick in once the insured has retired.
    •   Critical Illness Insurance: This cover can be until the age of 75. It can also come to an end once the lump sum payment has been made by the insured.
  • Taxes:
    • Disability Insurance: If the monthly premiums are paid by the employer, they are subject to tax. If the premiums are paid by the insured, then they are not subject to tax.
    • Critical Illness Insurance: Usually tax-free.
  • Premium refunds:
    • Disability Insurance: If the benefits are not paid partial refunds will be given.
    • Critical Illness Insurance: If there is no claim the premium will be paid back.

Get in touch with the team at SVIC today to find out more information about our wide range of insurance covers. Call us to schedule an appointment.