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Critical illness insurance : An overview

Why should you buy critical illness insurance cover?

If you, or those who depend on you, would face financial difficulties if you became critically ill (if you had cancer, a heart attack or a stroke), you may want to consider taking out critical illness cover. 

 

When you are critically ill, the last thing you need is any financial worry like the fear of losing your home because you cannot pay your mortgage.

 

You can use the money you get from a critical illness cover claim however you wish.  You may pay off your mortgage, pay for medical treatment, make changes to your home, pay for your living expenses or take a final holiday.

 

For most people, a serious illness that stops income is a major financial problem. Many homes rely on two incomes to sustain a decent standard of living. That standard could be shattered if one income suddenly disappeared for good.

 

In the past, many serious illnesses lead to death, and life assurance was, and still is, a sensible precaution. Advances in medical technology are happening very fast. What could have once been fatal is not always so now.

75% of people now survive a stroke. Unfortunately, 60% of stroke victims are left with a disability.

Cancer victims are now more likely to survive, and survive for a longer time, than a few years ago

 

If you suffer a major illness, you may not be able to go back to full time work. You may be unable to work at all. You may have to go part time or do a less strenuous job than before.

 

The chances of developing cancer before you reach 75, is one in three. There are now over 800,000 people living who have survived a heart attack.

 

As well as reducing income, a major illness may have extra costs such as a wheelchair, stair lift, or home alterations.

 

What do you get?

The insurer only covers the critical illnesses defined in their policy and no others.   


There are many different critical illness policies on the market, often offering apparently similar cover.

   

Which Critical Illnesses are covered?

Different policies cover different critical illnesses.  

Each policy will only cover the conditions set out in the product literature

 

Most policies will cover the three major risks;

  • Cancer – excluding less advanced cases  

  • some types of cancer are not covered.

  • Heart attack – of specified severity  

  • Stroke – resulting in permanent symptoms  

 

Other Illnesses

There are a lot of other illnesses that specific insurers choose to cover.

 

Some of these are useful and based on actual cases

 

Others are little more than window dressing as few people ever catch that illness

 

What is not covered?

Again, this varies by insurer

 

The ones that apply to almost every policy are;

  • Alcohol or drug abuse   

  • Criminal acts 

  • Flying

  • Hazardous sports and pastimes   

  • HIV/AIDS

  • Living abroad 

  • Self-inflicted injury 

  • Unreasonable failure to follow medical advice   

  • War and civil commotion

 

As these are so common , we do not mention them on product profiles

 

The cost of critical illness cover

You pay a monthly or annual premium.

 

Cost depends mainly on:

 

  • The level of benefit you select. The higher the benefit , the higher the premium.

  • Your age at the time you start the policy. Older people are more likely to suffer a critical illness, so pay more.

  • Your health at the time you start the policy. If you have existing health problems you might be refused cover or have to pay more.

  • The health of close family. If there is a family tendency towards any of the critical illnesses, you might be refused cover or have to pay more.

  • Hobbies and lifestyle.

  • Whether or not you are a smoker. Smoking makes you more likely to suffer a critical illness, so you will pay  a lot more.

 

Variations

Two main types of critical illness cover are available:


  • Life and critical illness cover - pays out a lump sum if you either die or are  diagnosed with a critical illness. 

  • Stand alone critical illness cover - pays out a lump sum if you are diagnosed  with a critical illness  and survive  for at least 28 days.

 

An increasingly common variation is Cancer cover ; only covers cancer.


This often specifies which cancers are and are not covered, and the cover usually differs between men and women

  

Most critical illness covers pay out a lump sum benefit.

A variation is to have the benefit paid as a regular income for a set number of years.

 

There are some unusual covers around, e.g. Treatment cover ; pays for  treatment  in the USA.

 

You should also think about how long you want  the cover for.  You can choose cover for a set  number of years, perhaps until your mortgage is  paid off.  Or you can choose a policy that has no  fixed period, so you can keep the cover for as  long as you need it.

 

Many policies automatically provide some critical  illness cover for your children.  If you have a  family, you may want to consider a policy with this  benefit. 

 

Who can buy cover

 

There is usually a minimum age of 18

 

Most have a maximum age to tie in with retirement ages of 60 or 65

 

A number are now offering cover for those up to 70 or 75

 

There is a catch to buying cover if you are 60 or over. Some covers such as Parkinson’s Alzheimer’s and Motor Neurone Disease –only apply if caught before age 60 or 65 .

 

If you are suffering from, or have suffered from, a  serious illness, you may not be able to take out a policy. 

 

Or you may be able to buy a policy that  does not cover any critical illness directly or  indirectly related to your illness, or a policy  charging a higher premium.

 

You may also have to  pay a higher premium if certain conditions, for  example, heart disease or cancer, run in your  family. This is because you may be more likely to  suffer a critical illness.

 

Can I increase my cover after the policy starts?   

Some insurance companies allow you to increase  your cover to keep up with inflation or after certain  events – for example, if you get married.

 

If you take up these options, your premium will increase  to pay for the increased cover provided.  

 

Others offer inflation linked cover.

 

Other insurance companies may allow you to increase the cover at any time, but you will  generally need to provide up-to-date information  (for example about your health) before the  insurance company decides whether you can  have the extra cover.