Personal Finance

Critical Illness

Critical IllnessProtect your loved ones now to provide for a brighter future

Critical Illness Level Term Assurance pays out a tax-free lump sum on the diagnosis of a specified critical illness. The benefits from the plan can be used to repay any outstanding debts, be invested to provide an income to replace lost earnings and/or modernise your home, e.g. widen doorways, create a downstairs bedroom.

If you were to suffer a heart attack, stroke or cancer and were unable to work, how would you and your family manage financially?

This type of protection is designed to ensure the last thing you will be worrying about is money at a very difficult time.

Every 20 seconds someone suffers from a critical illness (BUPA 2007).

What is not covered by critical illness insurance?

Some serious illnesses might not be covered by a critical illness policy. For example, some cancers and ‘chronic’ or long-lasting conditions that could mean you can’t work might not be covered.

Health problems you knew you had before you took out the insurance are also very unlikely to be covered.

Unless you have a combined life insurance with critical illness policy this type of insurance does not pay out if you die.

There are different types of critical illness insurance policies available, so it’s important to know exactly what’s covered.

When might you need critical illness cover?

Don’t rely on benefits from the state to support you if you become critically ill – these are probably less than you think.

The money you get from a critical illness policy can be used to pay off a mortgage, to pay medical bills, home modifications or for anything else.

Critical illness insurance could be a good choice for you if:

  • You don’t have savings to tide you over if you were seriously ill
  • You don’t have a good employee benefits package to cover a period of time off work due to sickness

How likely are you to make a claim?

Insurance is based on risk. How likely is it that you will make a claim?

If you are young, fit, well, with a good family medical history and a healthy lifestyle, your chances of getting an illness severe enough to be covered by one of these policies might be fairly low. The older you are, the more chance you have of getting ill – but to reflect this, the premiums are higher and any pre-existing medical conditions won’t be covered.

Medical technology keeps advancing, which means that the impact of many illnesses is less serious than before. Screening techniques have also improved so that some cancers can be diagnosed earlier and treated before they reach the critical stage.

Is critical illness insurance good value for money?

Critical illness cover will only pay out if you are diagnosed with one of the illnesses specified in the policy. It will not cover you if you can’t work due to any other illness and this is more likely to happen.

This type of insurance can be expensive over the long term, especially if linked to a 25-year mortgage. Before you buy you need to be sure you can keep up the payments over the long term.

However, successful claims for people with no other way of supporting themselves can make a big difference in keeping them going financially, just when they need it most.

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