Critical Illness Cover

Critical illness cover offers a tax free lump sum payment upon diagnosis of specific serious illnesses or disabilities. 

This financial support can be invaluable for covering various expenses such as daily living costs, mortgage payments, or medical bills. While you might have other sources of income during illness, such as state benefits or sick pay, they may not suffice.

As a result, it’s very important to assess your potential financial needs in case of serious illness and consider whether additional funds would be beneficial. 

While critical illness insurance in many cases is a cost-effective way to safeguard your income, it’s essential to weigh its benefits and limitations against other options like income protection insurance before making a decision. 

In this article, we’re going to help you do just that by going through the ins and outs of critical illness coverage. So, let’s dive in without delay.

Common Illnesses Covered Under Critical Illness Cover

Understanding the scope of critical illness coverage is paramount when considering your insurance options. 

Different insurers offer varying levels of coverage, with some providing comprehensive protection across multiple conditions while others have lesser coverage.

Many policies also extend coverage to permanent disabilities due to injury or illness. With many providers the policy may include reduced payouts for less complex conditions or in case one of your children has a specified illness.

However, it’s essential to be aware that not every illness comes under coverage. Exclusions often include fractures and cancers that are non-invasive or high blood pressure.

How Do You Understand You Need Critical Illness Cover?

If you’re facing a serious illness that prevents you from working, you might expect your employer to continue providing some level of income or depend on state benefit payments.

Usually, employees are moved to Statutory Sick Pay within six months. Additionally, state benefits might not be able to replace your lost income sufficiently.

For those eligible, Employment and Support Allowance ranges from around £ 75 to £ 114. This, in most cases, is insufficient and makes it essential to increase your income.

Usually, it’s best to consider getting critical illness coverage if:

• You are the sole wage-earner in your family
• You don’t have sufficient savings
• You don’t have an employee benefits package

Calculating The Cost Of Critical Illness Cover

The cost of critical illness coverage can vary significantly based on your unique circumstances and the policy you choose. 

Critical illness policies offer protection from a wide range of illnesses and conditions, making it crucial to compare options from different insurers.

Several factors influence the cost, including your age, smoking history, current health status, weight, family medical background, occupation risk, and desired coverage level. 

If you have pre-existing health issues, certain conditions may be excluded from your policy or result in higher premiums.

Premiums can be either reviewable or guaranteed. Reviewable premiums are typically assessed every five years and may increase with each review. 

Conversely, guaranteed premiums remain constant throughout the policy’s term, offering peace of mind regarding future payments, albeit potentially at a slightly higher initial cost.

Deciding The Amount Of Coverage Needed

Critical illness insurance is commonly acquired alongside other insurance types like life insurance or income protection, often as part of a combined policy.

Determining the necessary coverage involves considering various factors, including outstanding debts, number of dependents, workplace benefits, take-home income, mortgage or rent obligations, and existing insurance arrangements.

You have the flexibility to tailor your coverage according to your specific needs and budget constraints by adjusting the amount of coverage and associated monthly payments accordingly.

Factors To Consider When Purchasing Critical Illness Cover

1. Always Provide Accurate Medical History

Ensure honesty and accuracy when disclosing your medical background to the insurer. False or incomplete information may result in claim rejection during the assessment process.

2. Carefully Review Policy Details

Make sure you thoroughly examine the policy terms and conditions, paying close attention to coverage specifics and exclusions. Definitions and limitations may vary among insurers, so seek clarification from the insurer, an insurance broker, or a financial advisor if needed.

3. Try To Explore Premium Waiver Options

Consider adding a ‘waiver of premium’ feature to your policy for additional protection. This provision automatically covers your monthly premiums if you become unable to work due to illness or injury, preventing policy cancellation. Note that it typically activates after a minimum sick leave period, usually six months.

4. Utilize the Cooling-Off Period

Take advantage of the 30-day cooling-off period post-purchase to reassess your decision. During this period, you can cancel the policy and receive a full refund if desired.

5. Evaluate Switching Opportunities

Regularly assess the insurance market for potentially better deals, particularly while maintaining good health. Whether switching providers or updating your existing policy, thoroughly understand the alterations in coverage and associated conditions.

Additionally, anticipate potential premium increases due to advancing age when changing policies.

Cancelling Critical Illness Cover

You can request cancellation of your policy from your insurer at any time, but always consider the following:

• Replacement cover may incur higher costs as premiums typically rise with age.
• Pre-existing medical conditions might not be covered by a new policy.
• Once cancelled, reinstating the policy is not possible.
• Usually, there are no cancellation fees; however, you’ll cease payments without receiving a refund for any previously paid premiums.

Frequently Asked Questions (FAQs)

1. Is critical illness coverage tax-free?

Yes, the lump sum payout from a critical illness policy is typically tax-free, providing financial support during a challenging time without additional tax obligations.

2. What is the waiting period before I can make a claim on my critical illness cover?

The waiting period, also known as the ‘deferment period,’ varies depending on the policy and insurer. Typically, there’s a waiting period of around 14 to 30 days after diagnosis before you can make a claim.

3. Does critical illness coverage include terminal illness benefits?

Some critical illness policies may include a terminal illness benefit, which pays out a lump sum if you’re diagnosed with a terminal illness with a life expectancy of fewer than 12 months. However, this benefit may not be included in all policies, so it’s essential to check the policy details.

4. Can I add critical illness cover to my existing life insurance policy?

Yes, many life insurance policies offer the option to add critical illness coverage as a rider or additional benefit. This allows you to have both life insurance coverage and protection against critical illnesses within a single policy.

5. Can I get critical illness coverage if I have pre-existing medical conditions?

It may be possible to obtain critical illness coverage if you have pre-existing medical conditions, although the terms and premiums may vary. Some insurers may exclude pre-existing conditions from coverage, while others may offer coverage with higher premiums or specific limitations.