Life & Health Insurance Practice Exam 2025 - Free Practice Questions and Study Guide

A critical illness plan is specifically designed to pay a lump sum benefit upon the diagnosis of a covered critical illness, such as heart attack, stroke, or major organ failure. This lump sum payment is intended to help the policyholder manage the financial burdens that arise after receiving a serious diagnosis. It can cover various expenses, such as medical bills, mortgage payments, or other financial obligations that may be challenging to handle during a time of significant health crisis.

This type of coverage is particularly beneficial because it provides immediate financial support, allowing the insured to focus on their recovery rather than worrying about ongoing expenses. It does not, however, provide comprehensive coverage for all medical expenses, which distinguishes it from other types of health insurance plans. Additionally, critical illness plans do not typically cover daily benefits during hospitalization or routine doctor visits, as they are not designed for those purposes. Instead, their main aim is to provide a one-time financial payout in response to a serious health event.