Critical illness insurance is a type of long-term insurance policy that provides cover for a number of specific illnesses. If you were to contract one of these illnesses the policy will pay out, and you will receive a lump sum. It is entirely up to you how you spend this, although the majority of people use it to pay off their mortgage, or to make alterations to their home if required, for example, making your property more accessible to wheelchairs.
The types of illness covered by critical illness insurance are serious, long-term conditions such as strokes, heart attacks, Parkinson’s Disease, multiple sclerosis, loss of limbs, and cancer. Be careful to check the small print of your policy carefully to confirm what illnesses are included, and how serious the condition must be to qualify.
Without a doubt, critical illness insurance provides a large sum of money when you need it the most. Although you may be in receipt of sick pay from your employer, or state benefits, this amount may not be enough to cover all your outgoings. If you are contemplating taking out critical illness cover then think about how much money you would need if the worst should happen.
Before taking out a policy you should be aware that not all serious illnesses are covered; some types of cancer, for example, are excluded, and you will not be covered for health conditions that you have suffered from prior to taking out the policy. In addition, the policy will not pay out in the event of your death; you would need additional life cover if you wish to leave a lump sum, or regular monthly income, to your dependents when you die.
Before taking out critical illness insurance you should think carefully about whether you need it. If you were to become seriously ill then state benefits may not be enough for you to live on. This depends very much on your individual circumstances, and you need to take into account a number of factors whilst you decide whether critical illness insurance cover is necessary. These factors include; whether or not you have children who depend on you financially, if you are married, or cohabiting, and your partner works, and if you have any significant savings.
In general, critical illness insurance could be a good idea if you do not have a good employee benefits package to cover you should you be off work for a long time due to sickness, and/or you do not have enough savings to draw upon should you suffer from severe ill health or disability. In the same way, you may not need critical illness insurance if your employer offers a generous employee benefits package during times of sickness, you live with a partner who can support you whilst you are not working, or you have savings that you can use, if necessary, to pay for your monthly outgoings.
Of course, an important consideration when deciding whether to take out critical illness cover is how much it will cost. Your monthly premiums depend on a number of different factors, namely, your age (the older you are when you take out a policy the higher your premium will be), your current state of health, how much you weigh, your family medical history, your occupation (some jobs are seen as posing a higher risk to your health than others), and the amount of cover you wish to take out. Always bear in mind that the cost of critical illness cover can be quite high, and you may never reap the benefits of your policy. In addition, if you never make a claim during the policy term you will receive no money back.
When you apply to take out a critical illness policy your insurer will ask you a number of questions about your health, and your family’s medical history. Be sure to answer these questions honestly as if you do miss out any important details and later make a claim your insurance provider may refuse to pay out. If you have a pre-existing medical condition you may find an insurer who is prepared to cover you, but your premiums will be higher than those charged by a standard policy. If you are reluctant to discuss your medical details with your insurance broker you can ask to send the information to the insurer’s medical officer directly.
If you decide that you require critical illness insurance then you can purchase a policy in a number of ways. Firstly, you can seek the advice of an independent financial advisor who will look at all the policies on offer and choose one that best suits your needs (you will be charged for this service). Secondly, you can purchase the policy yourself direct from the insurance company. Although purchasing direct from an insurance provider is cheaper in such that you do not have to pay for the services of a financial advisor, if you are at all unsure about the level of cover that you need then advice from an experienced professional could be well worth the additional expense.
Critical illness insurance is one of the less expensive ways to protect your income should the worst happen, but bear in mind that it does have some limitations. There are other types of income protection insurance available, for example, income protection insurance; consult an experienced financial advisor, or insurance broker if you are at all in doubt as to what type of policy best suits your individual circumstances.