Legal & General is urging people to consider the devastating impact that having a critical illness could have on their ability to save into their pension.
The insurer estimates that someone aged 30 would need to save £292 per month in order to live comfortably in retirement. However, if they were to suffer from cancer or a heart attack their saving potential may be significantly affected. Depending on how well they recover from the condition and to what extent their ability to do their own job has been compromised, they could experience a drop in income and this may be long term. If that person were to delay paying into a pension for 10 years, they would have to save £635 a month to achieve an equivalent pension.
Bonnie Burns, Protection Product Marketing Director says: "It is well documented that many people do not save enough for their retirement. If you are unfortunate enough to suffer a critical illness then you may never get your pension plan back on track. Critical illness cover should be an important consideration for anyone looking to protect their lifestyle and their ability to continue to save. The earlier in your career you take out a policy, the cheaper it is and you can protect your most important years in terms of savings capacity."
The proceeds from a critical illness policy could be used to make regular payments into a pension plan. An average payout of £60,000 would provide two years worth of monthly pension savings (for a 30 year old at £292 gross a month) and still leave over £50,000 which could be used to pay off some debt or help with the cost of medical care.
Critical illness facts:
Around 8,000 women under 50 are diagnosed with breast cancer every year in the UK
For those aged 45-64, cancers were the leading cause of death among both men and women
Multiple sclerosis is the most common potentially disabling disease of the central nervous system affecting young adults in the Western world
Customers who take out Legal & General's Critical Illness Cover plan are covered for 35 illnesses, but the most common conditions claimed for are:
1. Cancer (accounting for around half of all claims)
2. Terminal illness
3. Heart attack
5. Multiple sclerosis
The average age of claimants last year was just 45. Policy terms run from between 5 and 40 years and the maximum sum assured is £1 million.
Not all forms of cancer are covered under critical illness cover plans.
Critical illness insurance: News update: August 2008