Critical Illness Cover


Critical illness insurance pays out a tax-free lump sum if you are diagnosed as having one of the specific life-threatening conditions defined in the policy.   Critical illness insurance pays out a lump sum on the diagnosis of a range of serious illnesses. Provided the patient survives a minimum period after diagnosis, typically 21 or 28 days, the cash is paid, regardless of whether they make a full recovery. The number of conditions covered varies from insurer to insurer but they will include a heart attack, stroke and most forms of cancer. Each policy will specify exactly the range of illnesses that it covers.  Advances in medical know-how are making it possible for people to survive and even enjoy life during and after suffering a serious health setback. However, if you survive but are not well enough to work, you will still have the mortgage and bills to pay. In fact, it is likely that your living costs will increase if you need some sort of nursing care or have to adapt your home accordingly. Therefore, critical illness insurance is designed to cover both loss of earnings and a potential increase in living expenses.  There are broadly two types of critical illness policy, whole of life and term cover. As their names suggest whole of life lasts as long as you live, whereas term is for a fixed period; usually 10 or 25 years.  When considering a recommendation for critical illness cover, you have to choose between guaranteed and reviewable rates. Guaranteed critical illness polices are so called because they charge the same premiums for the whole of the policy. A reviewable policy has rates that may be altered by the insurer. A typical reviewable policy will have premiums fixed for the first five years and then reviewed at regular intervals, whether every five years or even every year.  The policyholder’s advancing age and likelihood of developing serious disease are factored in from the outset, so there is no age banding once the policy starts - unlike private medical insurance.  If you already have a life assurance policy you may think critical illness cover is a waste of time but it offers very different protection. Your life assurance policy will only pay out if you die whereas critical illness insurance will pay up as soon as you are diagnosed with a life-threatening illness.   Different policies will cover a different number of critical illnesses. According to the Association of British Insurers (ABI), for a policy to be called "Critical Illness" it must cover three core conditions. These are a heart attack, cancer and stroke. The ABI also sets down conditions that will typically be excluded from critical illness policies. These include drug abuse, AIDS and even contracting a terminal illness when living abroad. Some types of cancer may also not be covered. The full definition under each heading in your policy document shows what your policy covers. It is crucial to read these carefully, as finding out you are not covered on claiming, can only make a devastating situation worse. Being totally honest on your application is also crucial - insurers hire entire departments whose job it is to investigate the validity of claims. If you don't understand anything or require more information ask your financial adviser. Policies often offer combined life and critical illness cover. These pay out if you are diagnosed with a critical illness or you die, whichever happens first. What Is Covered ? What Is Not Covered ? Buying Critical Illness Insurance