Do I Really Need Critical Illness Cover?

Do I Really Need Critical Illness Cover?

June 24 2019 | Category: Money advice

At Chilvester Financial, we provide a wide range of financial protections and insurance, all designed to help you make the best decisions for you and your family now, and in the future. Critical illness cover is something we get a lot of questions about. It turns out that, while lots of people know what life insurance is, many people aren’t aware of critical illness cover, and how it can actually be more essential than life insurance at times. So today we wanted to take a look at what critical illness cover is, how it works, and why you might need a policy of your own.

Why Would I Need Critical Illness Cover?

Simply put, because statistics show you will probably get seriously ill at some point in your life, and you don’t want to be at a financial loss because of it. Critical illnesses like cancer or heart attacks can leave you out of action for weeks, months or even years, not able to work at your full capacity or at all. If that were to happen, your pay would likely be reduced, since sick leave can usually only cover a certain amount of time at full pay. Worrying about money is the last thing you need when dealing with a serious illness, which is where critical illness cover comes in.

What Is Critical Illness Cover?

Critical illness cover is a type of life insurance policy, but instead of paying out on your death, it pays out a tax-free lump sum if you are diagnosed with a critical illness or specific medical condition. The exact number and variety of conditions covered will differ depending on your insurer with anything up to 90+ conditions, but there are four core conditions that tend to be covered by all critical illness policies:

  • Cancer
  • Heart attack
  • Stroke
  • Multiple sclerosis

Legal & General, one of the biggest insurance companies in the UK, issued a report in 2017 that shows that 64% of critical illness claims were for cancer (with female claims for cancer higher). Heart attacks made up another 10% of claims and strokes another 6%. So in total, 80% of all claims in 2017 were for Cancer, Heart attack or Stroke. The average age for a claim is 47 showing that critical illnesses can happen at any time and not just in old age. If you have critical illness cover in place and you are diagnosed with a condition covered by your policy, then you will be eligible for a pay-out to help support you and your family during a difficult time.

So How Does Critical Illness Cover Work?

In a lot of respects, critical illness cover is very similar to life insurance. You take out a policy over a certain number of years (usually the length of your mortgage term, or until your retirement date), and you pay a premium each month to keep the policy going. If you need to claim, you talk to your provider and arrange a pay-out. These usually come as a one-off tax-free payment, but will vary from provider to provider, so make sure you check with them. There are no rules on how you spend this pay-out either, so you could use it to pay off the mortgage, contribute towards living costs, medical bills or care expenses – whatever makes your life easier!

But like any life insurance policy, it is important to read the fine print carefully so that you know exactly what your policy covers. The list of conditions your policy covers might be very long and even if your illness is on the list whether or not you get a pay-out and what size it is could depend on how severe or permanent the condition is. For example, some policies won’t cover some forms of easily treatable cancer, a mild stroke or a mild heart attack (which are often excluded based on severity). The insurers are increasingly doing more to help in this area so most now offer a set of reduced pay-outs for less severe critical illnesses like these. You are also less likely to be able to take out critical illness if you have already been diagnosed with a serious condition, so this is definitely one to take out in advance.

This is one of the reasons we say you need to think about insurance while you are healthy – not when you find out you’re ill. This is a situation we come across all too often, and once you have a serious condition there’s a limit to what we can offer you. So rather than wait until then, we highly recommend looking into critical illness cover sooner rather than later.

If you run your own business, critical illness cover can literally keep things afloat if you were to suffer an illness or injury, and if you have a family to care for, it’s an obvious choice.

If you’d like to know more about critical illness cover in general, or what Chilvester Financial can offer you specifically, just get in touch with us today to book your consultation.