How does critical illness insurance work? If you’re diagnosed with one of the conditions covered under your critical illness insurance policy, after the required waiting period you’ll receive a lump sum payment once your claim is approved. You can use that money for whatever you want. If you have disability insurance or extended healthcare benefits through your employer, it’s important to understand exactly what those benefits cover, and for how long. It’s a good idea to review your disability policy or healthcare benefits in comparison with the features of a critical illness insurance plan. Compare: