Critical Illness Insurance

Critical Illness Cover is about providing some financial security for you and people who depend on you financially, on the diagnosis of certain life-threatening or debilitating (but not fatal) conditions.

What is Critical Illness Cover?

Critical illness insurance policies pay out a single lump sum on the diagnosis of certain life-threatening or debilitating conditions such as a heart attack, stroke, certain types/stages of cancer, multiple sclerosis, loss of limbs etc.  Some providers can pay out a monthly income rather than a lump sum, but this is less popular.  You can use the payout to pay for medical treatment, pay off your mortgage or anything else.

Who Might Need Critical Illness Insurance Cover?

You would probably want to consider critical illness insurance if you take on a major commitment such as a mortgage or a business that operates on finance.  If you are diagnosed with a serious illness, the last thing you would want is the financial stress of not being able to meet mortgage or loan payments.  Your priority would be getting better.

How Can I Get Protected?

This is something you can discuss with a mortgage adviser or through a financial adviser who advises on critical illness insurance in relation to your wider financial circumstances.  You can also take out critical illness cover directly from an insurance company.

You will need to bear in mind that not all companies will give you advice about whether it is suitable for you. They should tell you whether they will be offering advice and recommending a policy, or giving you information only.  For example, income protection insurance may be a more suitable product for your circumstances or even pure life cover.

Things to Consider when taking out Critical Illness Cover

• Critical illness insurance pays out if you are diagnosed as suffering from one of the specified illnesses.  Make sure these illnesses are shown to you
• Read the policy document so that you're aware of the criteria that have to be met before the insurer will pay a claim, including defining the level of severity of a particular illness.  An example is cancer - not all cancers or stages of cancer are covered.  For heart attacks, the insurer will need to have medical evidence of the severity of the condition before paying a claim.  It does not cover simply any sickness that affects your ability to work – it is specific about which illnesses are covered
• Ask your adviser what other benefits may be included in the policy.  For example, many insurers now include protection for children up to a certain age
• Some insurers exclude all pre-existing conditions but others will decide on the basis of your personal medical history
• It differs to other types of protection insurance such as income protection or payment protection (which have different purposes) so make sure you understand what it does and whether it is right for you
• Before you take out the cover, the firm should give you a Key Features Document. This will set out the key features and benefits, as well as any exclusions or limitations. If you have any queries about these you should ask the insurance adviser or salesperson to explain the cover in more detail to help you make an informed decision
• If the insurer imposes any other conditions (e.g. family medical history) you should be told what they are before you take out the policy
• It's essential that you give full, honest answers to questions you are asked about both your own and family medical history. Giving incomplete or wrong information could invalidate your policy and any claim you make on it.  If you're not sure, it is better to mention things
• The insurance premium that is given to you by an adviser or salesperson is only an estimate.  The insurer will confirm the premium (either direct or via your adviser) once it has considered your medical history

New Policies

When taking out a critical illness insurance policy, premiums are typically lower the younger you are, but will also depend on your medical history and that of your close family. Some policies may offer to reduce the premium if they exclude a pre-existing condition, such as cancer, while some do not offer reduced premiums for exclusions.

Some insurers will cover more illnesses than others on their policies or may offer different benefits, such as waiver of premiums.  Some policies may be combined with life cover, which will usually make the critical illness element cheaper.

Many policies give you the option of reviewable or guaranteed premiums. Guaranteed premiums are more expensive, as you have the certainty that payments will remain level throughout the life of the policy. Reviewable premiums are usually lower, but prices could rise if, for example more claims are made in a certain time period.

Changing Policies

If you already have a critical illness type of insurance policy, then it may be worth considering changing policies so you have the right level of cover for your current circumstances, or to save money.  However, you might find that by replacing a policy you lose some of the benefits if you have developed any illnesses since you took out the first policy. This is because pre-existing conditions may not be covered under the new policy.  You may also want to check if an older policy covers you for more conditions than a replacement policy.

Some policies allow you to increase your cover – particularly after lifestyle changes such as marriage, moving home or having children. Ask your insurance company or adviser for information.  If you cannot increase the cover under your existing policy you could consider taking out an additional policy to 'top up' your existing cover.

Useful Links

>>> Critical Illness Cover Questions & Answers
>>> Speak to an Insurance Adviser (quotes & enquiries)
>>> Life Insurance Cover
>>> Income Protection
>>> Private Medical Insurance
>>> Mortgage Protection Insurance
>>> Mortgages