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
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.
is the difference between Critical Illness insurance and Income Protection
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.
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.
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.
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.
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.