Critical illness insurance provides a tax free lump sum should you contract one of the specific illnesses listed in the terms and conditions of the policy. You can spend this money as you wish; some people use it to pay off their mortgage or other debts, some use the money to make any necessary alterations to their home, for example, wheelchair access. Before taking out critical illness insurance you should bear in mind that not all illnesses, however serious, are covered, and there will be stipulations as to how severe the illness needs to be.
Examples of the types of illness covered by a critical illness policy are multiple sclerosis, stroke, heart attack, certain types and stages of cancer, and heart attacks. In addition, the majority of policies will pay out if you sustain a permanent disability due to illness or injury. You are only permitted to make one claim throughout the term of the policy; once you claim the policy comes to an end.
Policies vary between providers and some do pay out a smaller sum if you contract a less serious illness, or if one of your children is diagnosed with one of the conditions specified under the terms of the policy. In common with other types of insurance, a critical illness policy may not cover you for any pre-existing medical conditions. However, contrary to a life insurance policy critical illness insurance will not pay out when you die.
In order to understand fully what is, and what isn’t, covered by your policy make sure that you read the terms and conditions when they are sent to you with your policy documents.
Figuring out what illnesses are covered by a critical illness policy can be a daunting task, but so too can figuring out if you really need to take out a policy in the first place. In general, you would most probably benefit from critical illness cover if you are not in receipt of an employee benefits package that will cover a substantial period of time if you are off sick. In addition, a critical illness policy could also be a good idea if you have no savings to fall back on should the worst happen. In the same way a policy may not be of use to you if you live with a partner who can cover your living costs if you are unable to work, or if you already have some form of critical illness cover as part of an existing employee benefits package.
When calculating how much you will pay for critical illness cover your insurance provider will look at a number of factors; these include your age, your current state of health (including your weight), whether you are, or have been, a smoker, your occupation, and the amount of cover you wish to take out.
Critical illness insurance provides a very useful financial safety net should you fall seriously ill and become unable to work. However, when deciding if this type of policy suits your particular circumstances it is worthwhile to look at other types of insurance policy in order to see if they better meet your particular needs and requirements. Life insurance provides either a lump sum, or a regular income to your dependants should you die during the term of the policy. Income protection insurance will pay out a regular amount should you become unable to work due to injury or illness. Both products are worth investigating before you take out critical illness cover as they may prove to be a better match.
Before taking out critical illness insurance make sure that you can comfortably afford the regular payments as cover will cease as soon as you stop paying your premiums. Remember too that critical illness cover has no cash value so if you do not succumb to any of the illnesses stipulated in the policy terms and conditions during the policy term you will receive no financial benefit.
If you do decide to take out a critical illness insurance policy then you can keep the cost of premiums down by keeping healthy; losing weight and stopping smoking if necessary. It is also cheaper to take out this type of policy when you are younger as premiums also rise with age. Critical illness cover is also cheaper when purchased along with life insurance; in actual fact many insurers no longer sell critical illness cover as a standalone policy.
With regard to cost most payments are usually fixed although some insurance providers do offer reviewable premiums. This means that the cost of cover is reviewed on a regular basis and could increase as the policy term progresses.
If you decide that critical illness cover would be of benefit to you then be sure to shop around for the most competitive quote, and, more importantly, only take out a policy with a provider who has already earned a good reputation. Data is available that shows the proportion of claims that a company has turned down. This information is invaluable as it demonstrates the likelihood of you making a successful claim. You can also improve your chances of receiving a pay-out by answering all questions accurately and honestly when you take out the policy initially; particularly with regard to your medical history.