Life Insurance: Critical Illness Cover
The main question: If you become seriously ill and can no longer work, would your dependants/family be able to financial support your current outgoings- mortgage and other bills?
Whilst this is not a nice question, it’s still an important one as critical illness cover can help mitigate the unexpected.
If the pay-out is triggered, due to the insured being diagnosed with a serious illness, then they will receive a tax free lump sum amount.
For example, if your cover is for the length of 5 years and for an amount of £180,000. You will receive the full amount if you suffer a serious illness during this period.
These extra funds can be used at your discretion and so can pay for medical bills, modifications within the household or to clear of the mortgage. It is also advisable to invest some of the funds so that your family can have an income to pay for any future outgoings.
Now days, many insurers provide critical illness cover for children at no extra cost, however this cover will be limited to around £10,000 and £25,000.
Types of Illness covered
Like most types of insurance cover it is important to read all the details so that you fully understand what you have purchased.
With regards to critical illness cover, the list can be very long especially as some insurer’s cover more than 60 different injuries. However, it is important to note, that in many cases the illness needs to be critical or permanent before the pay-out will be triggered. For the case of cancer, treatable cancers will also not be on the list or it will need to be at a certain stage before the payout will be considered.
However, some insurance companies do make a small payout if the diagnosed condition is less severe. The policy will also continue, allowing you to make another claim over the same term.
Ultimately, it is of paramount importance to read the small print and understand the exclusions and inclusions of your policy.
Working out the affordability of your cover is one of the most important things to consider as the moment you stop paying- the cover will also cease.
As per all types of insurance cover, the premium is based on the risk of an event occurring. So the older and unhealthier the individual, the higher the quoted premiums will be.
To add, critical illness cover doesn’t have a cash-in value component, meaning no money will be reimbursed if you stop the cover part way through or if you don’t have an illness during the term of the policy.
In some cases, critical illness cover is only available with life insurance cover leading to critical illness cover being cheaper when bought combined than if purchased singularly. But remember, there is only one payout, so if the claimant is diagnosed with a critical condition than no further payout will be made once he/she passes away.
Moreover, premiums are typically fixed over the term of your cover but some insurance companies do offer reviewable premiums, which are basically variable in nature and dependent on your health over time- so theoretically it can go up or down.
Data on claims
It is mandatory for insurance companies to publish claims made by their policy holders. This data includes successful and unsuccessful claims- so it is definitely worth checking if your life insurance provider not only has affordable premiums but also pays out when required.
To stop your insurance company finding holes in your claim, it is important to provide an accurate depiction of yourself. It is possible this might be more expensive but at least your getting the right cover and you can be confident that the claim will be successful should the unfortunate occur. So, be sure to answer all the questions in detail and pay close attention to the medical conditions part of the application form.