Critical illness cover

Critical Illness Cover

Critical illness cover, sometimes also known as serious illness cover, is an insurance policy that pays out a lump sum if you’re diagnosed with certain life-threatening or debilitating conditions, including some forms of cancer.

This can go towards medical treatment, or to pay off your mortgage. In fact, you can use it for whatever you want.

The aim of this cover is to ease the financial burden that may be placed on you or your loved ones if a critical illness were to affect you, so you can concentrate on your recovery without worrying about how the bills are going to be paid. Another benefit is that the lump sum paid is tax free.

Critical illness insurance usually doesn’t pay out if you die. This is where life insurance comes in (see Life Assurance section). Policies tend to vary depending on the medical conditions they cover and when the payment is made. The cost is determined by a wide variety of factors, including the term of the policy, your age and any previous medical conditions.

In the past, most providers would pay only if the illness was fully developed. But now many insurers pay at least something for an early-stage diagnosis. Remember, insurers only cover the critical illnesses they define in their policy and no others.

Who might need critical illness cover?

Critical illness cover is designed to support extra costs if you fall ill so you might want to consider it if:

You depend heavily on your salary to support yourself and your family, or
You don’t have enough savings to live on if you were to become seriously ill or disabled, or
Your job won’t cover you for a long period off work due to sickness via your employee benefits package.

With Unemployment benefits coming in at around £50-£70 a week – depending on your circumstances – so if you don’t feel this is enough to cover your outgoings, you might consider critical illness cover.

How much cover will you need?

Think about the costs you will need to cover if you fell ill and couldn’t work – include all regular expenditures, such as utility bills and food. If you’ve got children, you’ll want to ensure that your family is protected financially in case you can’t work due to health problems.

You might want a policy to ensure that your mortgage is paid off – this is sometimes a requirement of mortgage applications – so decreasing critical illness cover helps to pay off debt (like a Capital and Interest repayment mortgage) that reduces over time. For additional protection, you might consider critical illness cover and life insurance at the same time. In this way, you can protect against differing circumstances and be able to choose how much cover you need for each policy. Contact us today to discuss this with an independent Financial Adviser.