Critical Illness Cover

What is Critical Illness Cover?

Critical Illness Cover is an insurance policy that pays out a tax-free lump sum in the event of you being diagnosed with a critical illness as defined in the policy. The lump sum can offer a financial safety net by replacing lost income if your illness prevents you from working. It may enable you can focus on recovery without worrying about your finances.

Many critical illness covers are tied in with life insurance but you can also get stand-alone cover.

What does a Critical Illness Policy Cover?

The conditions covered by a Critical Illness Policy will depend on the insurer but they are usually long-term, serious conditions such as cancer, heart attack or stroke, multiple sclerosis or Parkinson’s disease.

How does Critical Illness Cover work?

With Critical Illness, you pay a monthly premium and receive a tax-free lump sum for a pre-determined amount upon a claim.

On diagnosis of a critical illness, you may be unable to work. Although you may receive sick pay from your employer or other state benefits, this may not cover all your financial needs. A lump sum serves to replace lost income so that you can continue to pay your mortgage or other bills and also maintain your standard of living.

You need to decide how much you’d want the policy to pay out and how long you’d like the cover to last. For example, you may choose to keep the cover until your mortgage is paid off or until you reach retirement age.

You will complete a medical questionnaire during the application process where you will declare the medical history for yourself and your family. The insurer will then consider all the details to determine your monthly premium.

Once the policy is live, you can then make a claim on diagnosis of a critical illness as defined in the policy. Most policies only pay out once so the policy ends once a claim is made.

Many critical illness policies include children’s protection. This means that if your child was diagnosed with a critical illness, you would also receive a lump sum although the benefit amount is likely to be of a smaller amount.

What illnesses do Critical Illness Insurance cover?

The illness covered by a critical illness policy may vary depending on the insurance provider. They typically include cancers, heart attacks, heart disease and strokes as well as multiple sclerosis, Parkinson’s disease and organ failure. Many policies also include permanent disability, which may occur as a result of injury or illness.

In order to qualify for a payout, the illness may need to meet a certain level or severity. Some providers are more flexible than others and some cover a wider range of illnesses than others. For this reason, it is really important to consider the quality of cover offered by the provider when looking at insurance quotes. Therefore seeking advice from an insurance specialist is highly recommended.

Are there any exclusions?

Critical illness insurances don’t cover every type of illness and there may be exclusions for certain illness that yourself or an immediate family member have suffered from previously. You should check the insurance policy documents carefully so that you know what illnesses it will pay out for.

Do I need critical illness cover?

Critical Illness isn’t compulsory but the future is unpredictable and it can help to prepare you financially. If you would be unable to make ends meet without your normal working income, you should seriously consider taking out a policy.

You should consider getting critical illness cover if:

• You or your family rely heavily on your income

• You don’t have sufficient employee benefits to cover long term sickness.

• You don’t already have a financial buffer in place (e.g. savings) to tide you over if you were to become seriously ill or disabled.

How much critical illness cover do I need?

The amount of cover required will depend on your personal circumstances and may also be determined by your budget.

Here at The Mortgage Masters, we can carry out a full assessment of your circumstances and advise you on the level of cover required.