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Critical Illness Insurance Option

Generally offered as an optional benefit on your income protection policy, the Critical Illness Insurance Option provides a more affordable alternative to critical illness insurance, paying you an advanced payment of six times your monthly benefit should you suffer from a critical illness as defined under this option.

How does the Critical Illness Option work?

Generally, the Critical Illness Insurance Option essentially allows you to receive an advancement of up to six monthly benefit payments in a single lump-sum benefit without having to satisfy your waiting period.

You will generally be eligible for the lump-sum benefit if:

  • You selected the Critical Illness Insurance Option when applying for your policy, and

  • You suffer one of the specific medical conditions detailed by your insurer as applicable to this option, and

  • You do not suffer from a specific condition in the first 90 days after your cover begins, is increased or reinstated.

If you satisfy the above conditions you will generally be eligible to receive the lump-sum payment regardless of whether you are capable of returning to work.

Which medical conditions are eligible for the Critical Illness Insurance Option?

A sample list of the types of critical illnesses that can be claimed upon with this option:

Heart Disorders

• Heart Attack
• Out of Hospital Cardiac Arrest
• Coronary Artery Disease Requiring Bypass Surgery
• Replacement of a Heart Valve
• Surgery of the Aorta
• Cardiomyopathy
• Primary Pulmonary Hypertension
• Open Heart Surgery

Body Organ Disorders
• Cancer
• Chronic Kidney Failure
• Major Organ Bone Marrow Transplant
• Severe Burns
Nervous System Disorders
• Stroke
• Major Head Trauma
• Multiple Sclerosis
• Hemiplegia
• Diplegia
Other Events
• Loss of independent existence

Your particular insurer may include or not include certain medical conditions so please consult their Product Disclosure Statement for full clarification.

When do you receive the Critical Illness Insurance Option lump-sum payment?

You will generally be entitled to the lump-sum benefit once you have confirmed the diagnosis of one of the conditions defined in your insurer’s Product Disclosure Statement.

When you actually receive your lump-sum payment will depend on the payment schedule of your insurer, that is, the monthly date that they usually issue payments to their policy holders.

Do I still receive a monthly benefit if I am totally or partially disabled after 6 months?

If you are totally or partially disabled at the end of the six month period after you were entitled to your lump-sum benefit, you will then continue to receive a monthly benefit with no further waiting periods.

Is the Critical Illness Insurance Option lump-sum benefit taxable?

As the Critical Illness Option provides an advancement of your monthly benefit it is generally considered taxable by the Australian Taxation Office. This also means that the premiums you pay towards the Critical Illness Option lump-sum benefit will generally be tax deductible.

However, it is best to consult a tax agent before hand to find out whether your lump-sum benefit will be considered taxable.

Be Aware

The Critical Illness Insurance Option lump-sum benefit is generally paid instead of any partial disability benefit, total disability benefit, or any other benefit you would otherwise be eligible to receive.

You can generally only claim on the Critical Illness Insurance Option once in a 12 month period.

If you would like to compare quotes of income protection policies that offer the Critical Illness Insurance Option, please call us today on 1300 135 205.