Critical Illness Insurance

Critical Illness Cover is a form of financial protection, providing a tax-free lump sum upon diagnosis of a specific serious illness, medical condition or disability. These conditions are always specified within the policy.

The amount of cover will be agreed at the onset of the policy and it’s worth noting that a policy will only payout once in the event of a claim on the policy.

In the event of a claim, the policyholder can use the funds paid out by the policy as they wish.

Typically, Critical Illness payouts are used to supplement income, pay off debts, cover financial commitments, or to pay for any necessary alterations to the home following a diagnosis of a serious illness.

Insurance providers will offer policies on a set term basis for a specified number of years and some may offer terms on a “whole of life” basis. It’s a good idea to take advice to find out what’s best for you.

Providers calculate a monthly premium for the amount of cover required based on your age, gender, medical history, your occupation and the lifestyle that you lead. If you smoke, have history of ill health or have a dangerous job, you may find that you need to pay more for your cover.

Whilst terms and conditions do vary from provider to provider, most Critical Illness policies will cover the following:The definition of what constitutes a critical illness will vary depending on the insurance provider, however, in general all policies will cover heart attack, stroke and cancer.

You should also expect most policies to pay out in the event of total permanent disability, paralysis, loss of speech, liver or kidney failure, coronary artery bypass surgery, loss of limbs, multiple sclerosis,

Alzheimer’s, loss of sight or hearing, motor neurone disease, serious brain injury and third-degree burns.

If in doubt, you should always check the terms and conditions of the policy you’re considering.

Generally, Critical Illness Cover starts from the moment the first premium is collected once all underwriting procedures have been completed.

Whilst everyone’s circumstances are different, ask yourself this question: Would a long-term serious illness place unmanageable or unwanted financial pressure upon me and my family?

If the answer is “yes”, then this type of cover might provide financial security and peace of mind. More specifically, you should consider how your mortgage might be paid should you suffer a critical illness and if you have enough savings to support your financial obligations for what might be a considerable period of time.

Only you can decide what you need, but it might be something you should consider exploring with a financial adviser.

Most mortgage advisers highly recommend having Critical Illness Cover if you have a mortgage. A mortgage is normally the largest financial outgoing for a household and if you were to suffer a critical illness it would be good to know that your mortgage would be taken care of.

You should take advice on this because what’s right for you generally depends on your circumstances. You might choose one over the other or, indeed, you might choose to have both.

If you’re looking to cover your monthly outgoings, Income Protection Insurance might be the smartest choice. Most Critical Illness Insurance policies usually cover around 40 to 50 medical conditions, whilst Income Protection covers any medical condition provided it stops you from working. Another thing to bear in mind is that Income Protection Insurance pays you a monthly income if you can’t work, whereas Critical Illness Insurance pays out a single lump sum. If you’re unable to return to work, this sum may not be sufficient to last until retirement.

If you can afford to have both, you can be sure that you’ll have your bases covered: Your monthly outgoings would be covered and in the event that you develop a critical illness, you’ll also receive a one-off lump-sum payment, which could be used to pay off debts, make home modifications or bring forward a few plans or life experiences.

This is something you should talk to a financial adviser about. You don’t want to be either “over” or, indeed, “under” insured but Critical Illness Cover and Life Assurance, whilst different, can play a complimentary role in your financial planning.

Depending or affordability and your circumstances, it might be a good idea to have both. Most Life Assurance policies will pay out on diagnosis of a serious illness that your doctor says will result in your death within 12 months.

This means that, if you have a Life Assurance policy in place at the moment yo already have a form of Critical Illness Cover but, if you were to make a recovery, your Life Assurance will be gone and it might be difficult to get insured again in the future.

your cover won’t be affected. However, if you make an application for cover during pregnancy, it’s not unusual for a provider to place your application on hold until you’ve had your baby.

Some providers may accept an application during pregnancy. It’s worth talking to a financial adviser to find out what can be done.

You can but understand that most providers nowadays offer this type of insurance as “pure cover”.

This means that it has no investment element attached or fixed period where the payments must be made and therefore, once you stop paying your premiums or cancel your cover, your policy will lapse immediately.

This may not be in your best interests and you should always consult a financial adviser before making such decision.

Irrespective of whether you have a mortgage, Critical Illness Cover can provide real financial security for you and your family in the event of you suffering a serious illness or sudden disability.

Regardless of whether or not you have any dependants, Critical Illness Cover can provide welcome and much needed financial support if you are diagnosed with a serious illness and require extensive medical assistance or indeed, you need a lengthy period of time to recover.