Guide: Critical illness.

Getting seriously ill is the last thing anyone needs but it can happen. Critical illness insurance can pay you a tax-free lump sum or regular payment if you’re diagnosed with a critical condition. In this guide, we help you decide if this insurance is right for you…

Do I need critical illness insurance?  

Ask yourself how you’d manage if you were diagnosed with a life changing medical condition. Would you like to have money available to clear your debts, pay for medical bills or adapt your home to your needs? With critical illness insurance you can spend the money how you wish.

These policies can take some of the financial stress away so you can concentrate on getting better.

What’s the difference between critical illness cover and life insurance?  

Critical illness cover helps to support you financially if you’ve been diagnosed with a specific condition. For example, if you’re diagnosed with cancer, you can get a lump sum to help cover the cost of treatment or bills. Life insurance, on the other hand, is designed to help with your family’s finances after you die.

Many insurers offer policies which include both life and critical illness cover. These are often set up to pay out once either on your death or earlier diagnosis of a critical illness covered by the policy. They have no cash value at any time, and if your payments stop, so does your cover. 

What is the definition of a critical illness?

Good question. According to the Association of British Insurers, a critical illness insurance policy must cover cancer (excluding less advanced), heart attack (of specified severity) and stroke (resulting in permanent symptoms) as a minimum.

All other conditions are additional extras and can include the following: Alzheimer’s disease, aorta graft surgery, benign brain tumour, blindness, coma, coronary artery by-pass grafts, deafness, heart valve replacement or repair, kidney failure, loss of speech, loss of hand or foot, major organ transplant, motor neurone disease, multiple sclerosis, paralysis of limb, Parkinson’s disease, third degree burns, permanent disability, traumatic brain injury and many more.

Most critical illness contracts cover a core 36 critical illnesses and then expand from there. Every contract is different and will have different pay-out conditions, we always recommend speaking to an adviser to find a policy in line with your needs.

Does critical illness insurance pay out?

Yes, provided your condition meets the criteria laid out in your policy. Latest stats from Aviva, an insurer that we recommend, show that in 2021 93% of all critical illness claims are paid, with an average pay-out of £73,190. Please note: the policy only pays out once, after which it ends.

What’s the difference between level and decreasing critical illness insurance?

Level critical illness insurance is where the amount you are insured for remains the same through the term you select. A decreasing policy reduces over time, which means the amount you are insured for will reduce.

The rate at which your insurance decreases is designed to match that of a typical repayment mortgage. Decreasing policies tend to be cheaper than a level term policy because the cover falls over time and are often used to protect a repayment mortgage.

Do I need critical illness cover for my children?

It can give you peace of mind and make a big difference if your child is diagnosed with a critical illness. It might allow you to take unpaid leave from work or pay towards private treatment. Some insurance providers offer children’s critical illness benefit for free whereas others offer it as an additional extra. This covers your children for the same illnesses as you and sometimes additional child-specific illnesses too. The benefit usually has a cap, which is typically £25,000, but some insurance companies will let you increase this at a cost.

What is a partial payment?

Partial payments are paid if you’re diagnosed with a less severe critical illness. These conditions are diagnosed more frequently, and you are much more likely to make a full and speedy recovery.

The payment will be calculated upon the severity of the condition and can range between 10-25% of the policy sum assured. These payments can be capped to a maximum monetary value, so be sure to check your policy wording. 

A big benefit of partial payments is that most insurers will still keep your full cover in place with no deduction for the amount paid to you for a partial payment.

What extras can I add to critical illness insurance?

There are a range of extras you can add to your insurance policy, including:

Life insurance  

This can be added to a critical illness policy for a fraction of the cost and some providers offer this at no extra cost. This means if you passed away in a car crash the life insurance element of the plan would pay-out whereas a  critical illness policy would not.  

Fracture cover 

Fracture cover is offered by a few insurance companies and can be bolted onto a critical illness policy at a cost. With this cover, you could receive a lump sum of up to £6,000 (depending on where the fracture is) to help tide you over while you recover.  

Waiver of premium benefit

This is an add-on that provides cover for your monthly premiums. If you’re off sick, and unable to work for a time, this insurance will maintain your monthly premiums. Typically, you need to off work for 6 months before you can claim the waiver, but you can pay a little extra with some insurers to lower the wait. Having this benefit can be really useful, especially if you have limited sick pay and no income protection insurance in place. 

Second medical opinion 

This provides access to a database of consultant specialists throughout the UK, allowing a face-to-face consultation with a supporting report which if you wish can be sent to both you and your GP. This is useful if you have a critical illness and want a second opinion from an expert. 

Support helplines 

Some providers also offer helplines for mental health, medical queries, legal advice etc. For example, you could have a nurse on hand to discuss medical concerns, or access to mental health support.

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