Critical Illness Cover | Life Broker

By: Lifebroker.ie  05/12/2011
Keywords: insurance policy, Protection Insurance

Also known as Critical Illness Cover or Specified Illness Cover it provides a Lump Sum in the event of Critical Illness.

A critical illness policy normally pays out a tax free lump sum on the diagnosis of certain specified critical illnesses. Most policies will pay out following the diagnosis of heart disease, stroke, renal failure, cancer, paralysis, major organ transplant and coronary artery bypass surgery as well as a range of other conditions. Over recent years the number of diseases covered by a typical policy has increased to more than 40. One normally has to survive 14 days after the diagnosis of a serious illness to ensure payment.

With rapid medical advances the chances of surviving a major illness are greater than ever however the financial consequences of suffering a major life changing illness can be very substantial. The one-off payment from this type of policy is designed to help you cope with these costs which will typically include the need to adapt your home or car and/or undertake training for a different occupation.

Critical illness cover may be taken out on its own or included in ones mortgage protection policy to remove ones mortgage payments from your affairs should one suffer such an illness. If one has a mortgage policy it may be advisable to have a separate ‘stand alone’ policy to make sure that in addition to ones mortgage being paid off one has enough money to cover the above costs.

What is the difference between Critical Illness insurance and Income Protection insurance?

Critical Illness insurance pays one lump sum regardless, whereas Income Protection insurance pays a regular income. While Critical Illness insurance usually pays out between 14 and 28 days after the diagnosis, with an Income Protection policy it usually starts paying you an income after a period of several months. Likewise, although Critical Illness insurance enables you to keep the money, even if you make a full recover, Income Protection insurance may only pay you while you are unable to work, or for a fixed period of time, according to your policy. The two complement each other, which is why many people choose both Income Protection insurance and Critical Illness insurance to run side by side.

Critical Illness insurance can also be included in your mortgage protection policy to take away the burden of your mortgage payments in the event of a serious illness. If you have mortgage protection it may be advisable to have a separate 'stand alone' Critical Illness Insurance policy to make sure that in addition to your mortgage being paid off you has enough money to cover your income and other expenses.

Some cover is better than no cover

The cost of critical illness cover can be far higher than life cover by itself and as a result it is not always possible to find a quote that is suitable for all budgets. In these cases, one way to reduce premiums is to look at a reduced amount of critical illness insurance so that you have at least some cover instead of nothing.

For example you may choose to cover the whole of your mortgage with life insurance but only two to three years worth of your salary in critical illness cover. Using this formula means that if you were to die your family would be able to pay off the mortgage and whilst you wouldn't be able to pay it off if you suffered from a Critical Illness, you would at least be able to maintain your financial security for a number of years.

Non-disclosure

A lot of focus is paid to insurance companies refusing to pay claims out but in a vast majority of cases, the refusal to pay a claim is because of non-disclosure.

Because of this risk it is vitally important that full information be disclosed to insurance companies or at the very least if you are unsure about a question you should tell the insurance company you are unsure.

Ensuring that insurance companies are fully aware of your background gives you the peace of mind that in the event of a critical illness, your claim will be paid in full.

Keywords: insurance policy, Protection Insurance

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