What is Critical Illness Cover and do I need it?
Critical illness insurance provides you with a lump sum of money if you are diagnosed with certain illnesses or disabilities.
The kinds of illnesses that are covered are usually long-term and very serious conditions such as a heart attack or stroke, loss of arms or legs, or diseases like cancer, multiple sclerosis or Parkinson’s disease.
If being ill has left you out of pocket, it can be really handy to have a large sum of money to spend on things like everyday expenses, paying off your mortgage or your medical expenses. You can use the money in any way you like, you don’t have to spend it on anything in particular.
Which illnesses does it cover?
Critical illness insurance will pay out if you get one of the specific medical conditions or injuries listed in the policy. It only pays out once, after which the policy ends.
The conditions and illnesses covered can vary significantly between different insurers. The most comprehensive policies cover 50 different conditions or more, but others are much more limited.
Examples of critical illnesses that might be covered include:
- heart attack
- certain types and stages of cancer
- conditions such as multiple sclerosis
- major organ transplant
- Parkinson’s disease
- Alzheimer’s disease
- multiple sclerosis
- traumatic head injury.
Most policies will also consider permanent disabilities as a result of injury or illness.
Some policies will make a smaller payment for less severe conditions, or if one of your children has one of the specified conditions.
But not all conditions are covered. Common exclusions include:
- non-invasive cancers
- hypertension – abnormally high blood pressure
- injuries such as broken bones.
Most policies will also state how serious the condition must be to qualify for a payout.
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When do you need it?
If you’re unable to work due to a serious illness, you might assume that your employer will continue to give you some level of income, or that you’ll be able to rely on benefit payments.
In reality, however, employees are usually moved onto Statutory Sick Pay within six months.
State benefits might not be enough to replace your income if you’re no longer able to work.
If you qualify, Employment and Support Allowance ranges from £74.70 a week to a maximum of £113.55 a week (2021/22 figures).
Consider getting critical illness cover if:
- you and your family depend heavily on your income
- you don’t have enough savings to tide you over if you become seriously ill or disabled
- you don’t have an employee benefits package to cover a longer time off work due to sickness.
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Five things to think about when buying critical illness insurance
1. Be honest about your medical history
It’s important to give your insurer all the information they ask for. When you make a claim, the insurer will check your medical history. If you didn’t answer truthfully or accurately in your application, or you didn’t disclose something, your claim might be rejected.
2. Read the small print
Take your time reading and completing the application. Make sure you know exactly what is and isn’t covered. Be aware that definitions and exclusions (what isn’t covered) can vary between different insurers. If you see something you don’t understand, ask the insurer, an insurance broker or a financial adviser.
3. Consider a waiver
If you pay a bit extra to add a ‘waiver of premium’ to your policy, your monthly premiums will be covered automatically if you can no longer work due to illness or injury. This is to protect against your policy being cancelled if you miss a monthly payment. However, it usually kicks in only after you’ve been off sick for at least six months.
4. You can change your mind
You have 30 days from buying the policy to change your mind and get a full refund.
5. Can you switch to a better deal?
It’s always worth looking around for a better deal, particularly while you’re still in good health.
You can either switch to another provider or stay with the same one and change policy. Either way, make sure you understand any changes in the new policy details and the conditions they cover.
Also, be aware that you might find yourself paying a little more, even with a better deal. This is because you’ll be older than you were when you bought the first policy.