Most critical illness plans pay a lump sum cash benefit on first diagnosis of a covered illness or condition. Some plans, especially older ones, will pay a benefit as a reimbursement plan.
The lump sum plan is superior in many ways. Read the definitions and never buy a life insurance based product.
Critical Illness Insurance pays out when the insured person is diagnosed with a covered health condition as listed in the policy. Life threatening illness usually pay 100% of the critical illness benefit. If the illness is serious but not as advanced or as high a stage as to be life threatening, it may still pay a % of the benefit.
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The lump sum plan is superior in many ways. Read the definitions and never buy a life insurance based product.