You may have come across critical illness cover when looking at life insurance plans but what exactly is it? How does it work and is it necessary? In this guide, we will break down what exactly critical illness cover is and answer the common questions many people have.
The guide will look at:
– What is critical illness cover?
– What you need to know before you buy
After this, you should be able to make a more informed decision on what critical illness cover is and if it is suitable for you.
What is critical illness cover?
Life insurance pays out money to your loved ones when you die but you can also opt for an extra form of protection. This is called critical illness cover. It is a form of insurance that is intended to pay out a tax-free lump sum if you are diagnosed with a disability or serious medical condition.
This is not the same as regular life insurance cover (which is designed to pay out money when you die) and can be taken out alongside it – or you can take it out by itself.
Critical illness cover is aimed to ease an often difficult financial situation that can arise during a stressful and upsetting time.
Why do you need critical illness cover?
One of the last things you want to think about while going through a devastating illness or being diagnosed with a disability is: “How am I going to pay for this?”
Critical illness cover forms a safety cushion for this exact reason, especially if you don’t have a substantial amount of savings that you can draw upon in an emergency. Unlike regular life insurance cover, the money will be paid to you and not to your dependents or loved ones.
Importantly, the money can be spent as you see fit. For example, you can use critical illness cover to pay:
– Your mortgage or rent
– Daily living expenses
– Household bills
– Specialist medical treatment
– On your children
Overall, it is there to give you one less thing to worry about at a time when everything from, how you are going to pay the bills to your health, is under question.
What you need to know before you buy
The types of critical illness cover
There are two main types of critical illness cover and it is important to consider which one is right for you. They are:
– Additional critical illness cover – If you are diagnosed with a critical illness or permanent disability you will get a payout in addition to the payout when you die.
– Combined critical illness cover- You will only receive one pay-out, even if you become critically ill and die within the term. If you become critically ill you will get a payout but then you will not be covered from then on.
What illnesses are covered?
First, we need to establish what we mean by a “critical illness.” Insurance companies generally define this as an illness that causes long-term and serious damage. This is not the same as a “terminal illness,” and the exact difference between the two policies will be discussed later in the guide.
The specific critical illnesses or disabilities covered will differ from policy to policy, but common examples include:
– Loss of limb
– Various types of Cancer
It is best to discuss with your insurer and read the fine print of your policy beforehand so you know exactly what illnesses and disabilities are covered.
How much does critical illness cover cost?
As with regular life insurance, there isn’t really an average cost for critical illness cover. The amount you pay will depend on a number of main factors. These include:
– Personal and family medical history
– What you do for a living
There is another factor that will affect the cost of your cover and that is the level of cover you choose to get. By the level of cover, we mean the conditions that are covered in the policy. There are also policies that have additional benefits, such as; accidental hospitalisation or mastectomy cover. You may find a cheaper option for critical illness cover but if it doesn’t contain the level of cover you need then it is better to go for something a bit more costly.
Here are some of the most common questions that our customers ask us when thinking about critical illness cover.
What about protection for children?
It is not pleasant to consider what will happen if your child becomes ill. However, it can be advisable to have some kind of cover in place so if an emergency does happen, you can focus all your attention on your child without worrying about how to pay for medical expenses. This is why some parents buy children’s critical illness cover in addition to their existing plan. This pays out a small lump sum if your child is diagnosed with a critical illness listed on the policy.
Does it matter if I’m a smoker?
As with regular life insurance, your medical history and lifestyle will be taken into account; which includes smoking. For smokers, the monthly premiums may be higher than that of a non-smoker. This is because smoking has a significant effect on your health and any future health issues you may have.
If you have quit smoking for 12 months, you may find that the premiums are lower than they would have been a year ago.
How does pregnancy affect critical illness cover?
If you apply for critical illness cover while pregnant, you may be asked to wait until after the child is born before your application is considered. This is because there are certain health risks that only come from pregnancy and so the factors that are affecting you now, may not be an issue in a few months. If you become pregnant while already on critical illness cover, the cover will not be affected.
What happens if I am already critically ill?
When you apply for critical health cover, your insurer will discuss your medical history with you. This includes any illnesses you currently have. Your insurer will also look at the likeliness of you contracting a further illness. This does not mean that you cannot get cover but you may be directed toward a different type of insurance.
What is the difference between critical illness cover and terminal illness cover?
Although critical illness and terminal illness both refer to serious medical conditions, they are both completely different products when it comes to life insurance. In insurance terms, a terminal illness refers to a condition where you are diagnosed to pass away within 12 months whereas critical illness refers to a severe condition that you may recover from or doesn’t severely shorten your life expectancy.
The question is, what type of cover do you need? Terminal illness cover will often be included in regular life insurance. Many standard policies will pay out the money if you are diagnosed before you pass away. Critical life insurance, on the other hand, has to be purchased as an extra.
Need Critical Illness Cover advice?
If you think you need some extra help or guidance then you can contact our FRIENDLY team of Life Insurance and Critical Illness Cover EXPERTS for FREE advice on 0800 009 6559.