Critical illness cover is a type of life insurance that helps you to meet your financial needs the moment you are diagnosed with a critical illness which falls under the terms covered by your policy. The policy can cover a variety of expenses from compensating you for a loss of income when you are unable to work, to meeting care costs and medical expenses.
A tax free lump sum is paid out to policy holders with specified serious illnesses including certain types of cancer, heart attacks, strokes and brain tumours amongst others. It is also paid out if you die or you are diagnosed with a terminal illness.
Life expectancy rates are continually increasing and critical illness cover becomes all the more important because as we age, we are more susceptible to a range of diseases.
How does critical illness differ from life insurance?
Standard life insurance policies pay out upon death and you will not be covered for illnesses that occur during your lifetime. Putting critical illness cover in place will mean that you have full peace of mind in the event that you suffer a serious illness.
The fact that the lump sum is released when you are diagnosed means that you can fund your rehabilitation while you're sick and that your dependents won’t be negatively impacted by the potential drop in household income.
What level of cover is right for me?
Assessing the level of cover you need will depend on several factors. In the first instance it would be beneficial to approach your employers to establish the length and amount of sick pay you will already get through work. In addition, you may be entitled to other work-related benefits that mean that your cover level won’t need to be as high.
You may also need to take into account the impact of any changes to your pay as a result of your illness. If you have outstanding debts to pay or a large number of dependents, you may have to adjust your level of cover accordingly. It’s best to speak with a qualified adviser who can help your explore your options and provide you with a policy which is tailored to your needs.
What illnesses will be covered under the policy?
The Association of British Insurers (ABI) has also outlined approximately 23 conditions that the recommend insurers should cover. This includes kidney failure, major organ transplant, Alzheimer's, multiple sclerosis, blindness and deafness.
Is there a way that I can reduce my premiums?
Non-smokers will have lower premiums, so it will be worthwhile investigating government schemes that can help you quit the habit. Leading a healthy lifestyle will also mean that you pay cheaper premiums.
You may want to consider getting the critical illness cover together with your life insurance policy as this may be a more cost-effective option then taking out two individual policies.
What should I potentially look for when taking out critical illness cover?
- Read the terms and conditions of a policy carefully to ensure that you understand exactly what you are covered for.
- Premiums on critical illness cover can be fixed or increased every few years after a review. Fixed or guaranteed premiums may start off being higher, but may actually be more cost-effective over the term of your policy. Establish which premiums you have at the time of taking out your policy. Your adviser can guide you through the options.
- Asses your budget to see if the level of cover you have taken out and the monthly premiums you will need to pay is affordable for you. Bear in mind that you will also have to take into account your existing outgoings such as mortgage payments.
- If you have children some providers will also cover them if they become critically ill or seriously disabled.
- It may be prudent to ensure that your insurer provides you with a copy of a key features document that will detail all the key conditions of you critical illness cover.
- It could be wise to check any age restrictions on your policy. Critical illness cover normally has a term of between 1 and 40 years, though the policy normally has to come to an end on your 70th birthday.
- You may wish to check if the policy also includes cover for total and permanent disability.
I have a pre-existing medical condition, will this affect my application?
Having a ‘medical history’ or existing medical condition at the time of your application will mean that you are considered a greater risk and as a result you may have higher premiums. This will also mean than some restrictions on your cover may be imposed. It’s best to seek advice; an adviser will be able to ensure your policy is placed with the most appropriate insurer, based on your needs.
What additional benefits can life insurance offer me?
The maximum payout for life insurance can be up to double that of critical illness cover, so it may be worthwhile investigating whether you need to take out life insurance as well. The age when your cover must end is also generally higher on life insurance as opposed to critical illness cover.
Life insurance can also fall under different categories, which all serve different purposes. As an example, mortgage life insurance will pay off your mortgage in the event of your death. In May 2012, the Bank of England warned that mortgage rates are set to rise, so this type of cover could add an additional buffer.
It’s advisable to speak to a qualified adviser. They can search the market to find you the best price as well as offer you some advice to help you decide on the right policy for you and your family. Call Asda Life Insurance free on 0800 9751208.Back to top