Critical Illness Cover - Explained

So what is Critical Illness Cover? Do I need it?

Critical Illness Insurance is a financial protection policy that provides you and your family with a tax free* lump sum of money upon the diagnosis of a medical condition listed in your policy documents. For many this will be an average of 40 conditions resulting in a full policy payment and a smaller set of conditions that will result in a partial payment of the total sum assured.

Whether or not you need Critical Illness Cover is something that only you and an insurance adviser can fully ascertain. You should consider the following questions when wondering if Critical Illness Insurance is right for you?

• Would you be able to pay off your mortgage if you were diagnosed with a critical medical condition?
• Would you want to have the essential funds required to adapt your house and lifestyle should you fall seriously ill?
• Would you find finances to pay for private medical healthcare useful?
• Would you like the security of knowing that if your child falls seriously ill, you could afford private medical treatment for them or to take time off work to care for them?

If you answer yes to any of these questions then it is worthwhile considering Critical Illness Cover. It would be impossible to discuss all of the options available for Critical Illness Insurance in this article but we can hopefully give you a good start in making the decision that is right for you.

One of the most important considerations to make is whether or not you want to include Life Insurance with your policy; this is often at a minimal (if any) extra cost. Critical Illness Cover will not payout a claim if you die within 14 days of the diagnosis of your illness. By including Life Insurance you remove that worry of the 14 day survival period, as the claim would simply transfer to a death benefit claim. This provides a bit of extra security for your family should the worst happen.

Choosing the right policy type

• Level Term Critical Illness Cover - This is ideal for those who want to know the sum assured of their policy stays the same throughout the policy term. It is popular with those who have Interest Only mortgages, or who simply wish to ensure that they have a specific sum of money to keep them secure.
• Decreasing Term Critical Illness Cover - This is typically recommended for those with a Capital & Repayment mortgage who want to ensure that they can pay off the liability in their mortgage should they fall seriously ill.
• Increasing Term Critical Illness Cover - This policy is suited to those who want to ensure that the value of the policy that they take out now, will retain its value in line with RPI. This means that should you take out your policy now and in a number of years need to place a claim, the payout you receive will have increased each year to offset the rates of inflation.
• Whole of Life Critical Illness Cover - This will likely be a very expensive policy to have and is not usually at the top of a recommendation list. With Whole of Life policies once you reach a certain age your premiums are regularly reviewed and increased. As you get older Critical Illness policies quickly shoot up in costs. If you do want a Whole of Life Critical Illness policy then this can certainly be arranged but you must be prepared that this will be an expensive option.

Choosing the right provider

This is not something that can simply be answered in this article. Different insurers offer different critical conditions within their policies, with claims criteria based upon different severity scales. Some offer additional features such as access to RED ARC or Best Doctors in their contracts, which places you in contact with dedicated health professionals who can assist in your diagnosis, treatment and follow up care. Some automatically include free childrens cover, whereas others do not.

Some insurance providers cover more illness in their contracts making them somewhat more desirable than others. However the more comprehensive the Critical Illness Cover is that you apply for, the higher the premium you will pay. You should consider the budget that you have for the policy before you apply for cover and what it is you are actually wanting to achieve from having the policy in place.

Another major factor in choosing the right provider for you is your individual circumstances. Some insurers are better at underwriting policies for applicants with certain health, travel, pastime and occupational circumstances, than others. It can make a significant difference to your policy acceptance terms i.e. premiums or exclusions, who you approach with your application.