Critical Illness Cover

December 13th, 2019

If you are not able to work due to serious or terminal illness, critical illness insurance will pay out a tax-free lump sum.
Whilst critical illness cover is different to life insurance cover, they are usually sold together.

Integrated/Joined critical illness policies vs. Independent critical illness

Having life insurance and critical illness cover on one policy will be more cost effective but this policy will only pay once. So if your insurer pays out on the critical illness than the life insurance policy effectively terminates.

In contrast, critical illness cover bought individually allows the buyer to determine a separate amount of cover that is not linked to their life insurance and hence, if you claim on the critical illness policy you will still have your life insurance policy as valid- making two claims possible.

How much critical illness cover do I need?

The answer to this question varies between person to person as it is dependent on your own personal circumstance.

For example if you became ill, would you like to have enough money to pay off your biggest debt (I.e. mortgage) or would you have enough supplementary income to make the payment month after month despite not having a job?

Naturally, the higher the cover you require, the higher the premium will be. So the question of affordability should also be taken into account.

Do I really need critical illness cover?

First you should check if critical illness is already provided for as part of an existing life insurance policy. In some cases, employers provide this benefit to their employees and they may include a death-in-service benefit too.

Note it’s possible that you may find that you don’t have critical illness cover and you don’t need it. For example, you may have no debts or have a high amount of savings and hence might feel that the premium is not justified. But you should be aware that determining the full cost of critical illness can be difficult, especially if you require a carer and/or specialist equipment.

What do I get if I buy critical illness cover?

There is usually list of illness that is covered in the policy, if the condition is not listed than it does not form part of the critical illness cover. Hence, when you are comparing the different policies, don’t only look at the premium cost as some conditions may not be listed in the critical illness contract.

Ultimately, you will need to decide if you wish to pay extra to have a wider range of conditions covered in your critical illness policy. Please note you will also normally be covered if you have a permanent disability due to an accident or illness.

In line with the above, reading the terms and conditions is very crucial for a critical illness cover policy. In some cases there can be clauses such as, no payout is made if you had the symptoms before your policy began or a payout is not made, if the diagnosis is made after a certain age or if you are ill due to sexually transmitted disease.

Is income protection and critical illness cover the same?

The short answer to his question is No. Income protection pays out if you are too ill to work, even if this is for a short or long period of time. Whereas critical illness cover pays-out a lump sum if you suffer from one of the listed conditions on the policy – so you are unlikely to return to work.

To add, income protection usually pays a monthly amount that is in line with your monthly salary, whereas critical illness pays out a lump sum and therefore is not linked to your income.

Long term income protection comes into action after a period of 4 to 52 weeks. Depending on the terms of the income protection policy you would receive your salary level payout until you return to work or when the policy expires – at the end of the policy contract or retirement. Please note, short term income protection is also available but the protection level is much lower.

Can I bring my critical illness premium down?

Much like the life insurance policy, there are a few ways in which you could reduce critical illness premiums. For example, if you are overweight you could reduce your weight, or generally change your life style behaviour i.e. by quitting smoking.

Also, as per the above, you could get an integrated critical illness cover which only pays out once and hence, the premiums are lower than an independent critical illness cover policy.

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