Critical Illness Cover

When purchasing a property most home owners take out a life insurance policy to cover the amount of loan in the event of death. Another financial product that it is often neglected is critical illness cover. A critical illness policy is five times more likely to be needed than life insurance before reaching retirement age, however people neglect to take one of these policies out.

Critical illness cover will pay out a tax free lump sum when you are diagnosed with a critical illness this includes cancer and heart attacks amongst others. Claim statistics highlight that you are five times more likely to be diagnosed with a critical illness then die before the age of 65.

Fortunately advances in medical technology have made it more likely that you are going to survive a critical illness. For example around 90% of men who are diagnosed with secular cancer are still around in 5 years time whilst around 80% of woman with breast cancer are still around within the same time period.

The purpose of critical illness insurance is so that the person can recover from the illness in a de stressed environment by taking away some of the financial worry of knowing how to pay the bills or they can use the sum for anyway they wish.

Critical illness policies have come under scrutiny over the years because of a lack in confidence of the insurance company paying out on diagnoses of a critical illness. All of the critical illnesses covered are stated in the policy document for each insurer. Each individual company will have differing definitions of critical illnesses and policies. It is up to an advisor to ensure that you know what you are covered for and to be able to research and find the most suitable policy for your individual demands and concerns. Please know what you are buying and get advice, do not be put off by critical illness insurance. It is worth the time to understand the policy so that you can be protected if the worst was to happen.

Critical Illness insurance options
Joint or Single

Critical illness cover can be taken out on a joint or single life basis. If you take out a mortgage and you require your mortgage to be paid off then a joint policy is often used. What this means is that if Mr and Mrs took out the policy which was enough to cover their mortgage then if one of them dies the policy would pay out and the mortgage would be covered. After which the policy would cease. It is however worth looking at the cost of two single policies as there is not usually a huge difference in cost for double the cover. This means that if Mr died then Mrs Policy would still be in place and would payout on her death and would be left to the family.

Level Term assurance or decreasing

Critical illness cover is taken out over a set term although some policies have options to increase this. A decreasing assurance known as mortgage protection insurance is designed to cover a repayment mortgage. The term and amount of the insurance should cover that of the mortgage so it decreases along with the mortgage to ensure that it is paid off. This is often cheaper than a level insurance. A level term assurance will remain the same throughout the term and is often linked to an interest only mortgage. As the balance of the mortgage is not going down the life insurance shouldn’t either to ensure that the mortgage is paid off.
Level term assurance is also used for family protection. Family protection is designed to payout a sum of money if you are diagnosed with a critical illness. This is often taken out on a level term basis so that the family can be secure in knowing that an exact amount will be paid out to survive if diagnosed with a critical illness.

Family Income benefit

Family income benefit works in a similar way to level term insurance but it pays out a tax free monthly benefit to the dependants for the term of the policy.

Waiver of Premium

Many policies offer the facility to protect your premium payments if you are off work for a specific amount of time which can be useful to ensure that your insurance is not sacrificed due to you being off work.

Level premiums or guaranteed premiums

Life and critical illness policies have two choices of premium guaranteed or reviewable. Guaranteed means that the premium will remain the same throughout the policy and reviewable means that the polices premium will be reviewed after 5 years and maybe subject to change.

Critical Illnesses Covered

Different Insurers will cover different critical illnesses and have varying definitions. It would is very time consuming for you to research into which provider had the most comprehensive cover for your needs. Our advisors have the experience, tools and software to enable them to advise you on which policy will have the most suitable cover for you.

The types of critical illnesses that may be covered