Dread disease coverage (also known as “critical illness” insurance) may be a rider on a life insurance policy or a standalone life or health policy. As a rider to a life insurance policy, the coverage pays alump sum prior to death if the insured contracts a dread disease listed in the policy such as cancer, heart disease, or AIDS.As a standalone life insurance policy, dread disease coverage pays a benefit only if the insured dies of one of the listed dread diseases. Premiums are normally lower than traditional life insurance.
Standalone dread disease health insurance normally pays a supplemental benefit should the insured contract a specified critical illness. For example, an insured with a cancer policy might receive a lump sum when diagnosed with cancer and so much per day of chemotherapy.