A Guide to Critical Illness insurance

Some people may see critical illness insurance as a kind of ‘add-on’ they can select when buying life insurance. But critical illness cover could actually be just as important as life insurance – especially if a serious illness stops you working for a while. Here is a guide to critical illness insurance from www.homeandlife.co.uk.

Critical illness insurance

What is critical illness insurance?

Critical illness insurance is designed to pay out a tax-free lump sum if you’re diagnosed with a critical illness that’s covered by your policy.

Who can critical illness cover benefit?

Life insurance is designed to benefit your family by giving them some financial support after your death. Critical illness insurance is different – in that it could benefit you while you’re still alive.

The point of critical illness cover isn’t just to compensate you and your family for what you’ve lost (i.e. your income), it’s to actively support you during your illness. The right critical illness cover could support both you and your family until you are well enough to work again (and afterwards).

Who needs critical illness insurance?

Even if you don’t have a family to look after and a mortgage to pay, you shouldn’t disregard critical illness insurance. If you’re supporting yourself with your income, you might need protection in place in case you are suddenly unable to work. Critical illness insurance could help support you during times of need.

How much does it cost?

The more likely you are to become ill, the higher your critical illness premiums will be. So if you’re older or already in ill health, you may have to pay more. Factors that can affect the cost of critical illness insurance include:

  • How much cover you want. If you want more cover, you’ll have to pay more.
  • Whether or not you’re a smoker. Smokers usually pay more – as they are statistically more likely to become ill.
  • Relevant conditions on your medical history.
  • If you have a particularly hazardous job or hobbies.

What can it cover?

This differs from policy to policy. All policies have to cover some core conditions – heart attack, stroke and cancer. Some policies cover vastly more, however.

The policy you should choose should be based on what you think you’re at risk of. For example, there’s no point paying more for a policy that covers a range of tropical diseases if you never travel.

Many policies put certain conditions on some illnesses too. For example, some insurers will only pay out for cancers of a certain severity, or only pay out for a stroke if it results in permanent symptoms.

How can the payout be used?

Critical illness insurance simply awards you a lump sum if you’re eligible for a payout. How you use that money is up to you and your family. Examples of ways a critical illness insurance payout could be used include:

  • Staying on top of the mortgage and bills.
  • Raising your children.
  • Paying off debts.
  • Replacing your lost income if you’re unable to work – or if family members have to take time off work to care for you.
  • Adapting your home or car to better accommodate your needs (for example if you have limited mobility).
  • Specialist medication or treatment.
  • A treat for everyone during a difficult time – for example a holiday.

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