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Critical illness cover is an insurance that should pay out a lump sum if you are diagnosed with a life-threatening illness such as cancer or heart disease. The money is tax-free and can be used in any way you like – to pay a lump sum off your mortgage, enable you to stop working, or buy private medical care.
When you take out a policy you can decide how long it will last e.g. until your children have grown up, or until the mortgage is paid off.
Critical illness cover is often available as a combined policy with term life insurance. In these instances, you can often only claim once.
For example, if you get a cash pay out after being diagnosed with cancer, the policy is effectively finished. There is usually no life insurance pay out if you die at a later date.
Who needs it?
Different people will need critical illness cover for a variety of reasons.
If you are single, you might want a policy to ensure your mortgage is paid, and some form of cover is often a requirement of the mortgage application.
If you have children, you may want to ensure your family is provided for if you can’t work due to ill health.
Recovering from a critical illness can also mean extra costs for you and your family e.g. making changes to your home or car. Your payout could be used to cover this.
Do I need critical illness insurance?
Most people could benefit from a critical illness policy, but the impact of the premium and the benefit of the payout will vary from person to person.
If the reason you are thinking of taking out critical illness cover is to pay for private treatment, you should, instead, consider opting for private medical insurance. However, because a critical illness payout has no restrictions on how you can use it, it could be useful to help pay your mortgage, or allow you to go part-time, and generally ease your household finances.
It’s a matter of weighing up the monthly cost against the benefits of a payout. If you and your family depend heavily on your salary, it could be exactly the kind of protection you need.
If you have no financial commitments or dependents, critical illness insurance may not be for you.
Illnesses covered will vary between insurers, so it’s important to check the details of a policy before you buy.
Policies commonly cover illnesses such as some types of cancer, heart attacks and strokes, and may include optional add-on illnesses.
Other conditions that could be classed as critical illness include:
A critical illness and terminal illness are different things – a standard life insurance policy should cover any illness where you are expected to die within 12 months of diagnosis
What about my medical history?
You will be required to give some details about your medical history in order to get a critical illness insurance quote.
This is so that an insurer can determine how much of a risk you are, and calculate an accurate price.
It is important to be honest here – your insurer could void any future claims if they find out that the information on your application is false.
If you need help with your Critical Illness Cover or have any questions, please contact us.
Posted on 16th Nov 2023
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