Do you need critical illness cover? Ask yourself the ‘what-if?’ question. Could your family make ends meet if you were to become seriously ill and unable to work?
When you’re fit and healthy, it’s easy to think serious illness will never happen to me. But the statistics say otherwise.
Cancer Research UK report that “every two minutes someone in the UK gets diagnosed with cancer.”
Heart UK state: “Every seven minutes someone in the UK will have a heart attack. Every 12 minutes someone in the UK will have a stroke.”
The incidence is higher for women. Serious illness, such as cancer or heart attack, affects one in four women and one in five men before retirement age.
So do you know that those you care about would find it difficult to pay the mortgage or other household bills if you were unable to work?
Then critical illness insurance is worth considering.
Few of us do, though. Research shows that among families with dependent children, 76% of parents have no plan for dealing with lost income due to ill health.
Parents are much more likely to insure the family pet (24%) or mobile phone (23%). Only 18% get critical illness cover.
Critical illness cover is a policy that pays out an agreed cash sum if you're diagnosed with a critical illness. (As defined by the policy’s terms and conditions.) You can use the money to cover you and your family while you’re incapacitated or to pay for private medical treatment to help your recovery.
Policies usually give cover for a set time, such as the lifetime of a mortgage. For as long as you keep paying your premiums, you’re covered throughout the term. Once the policy ends, your protection stops.
Cover can be 'level'. This is when the amount that would be paid out stays the same over the time of the policy. Or 'decreasing'. This is when the amount to be paid gets less over time. Or 'increasing'. This is when the amount to be paid out increases over time.
You can buy your critical illness cover as a standalone product or have it combined with your life insurance cover.
2. What illnesses does it cover me for?
Critical illness cover is a type of health insurance policy that can pay out a lump sum if you’re diagnosed with a life threatening illness.
Conditions covered vary with insurers. But there are seven main ones included in all critical illness policies:
- Cancer
- Coronary artery bypass
- Heart attack
- Kidney failure
- Major organ transplant
- Multiple sclerosis
- Stroke
Permanent disability caused by illness or injury is also usually covered by most policies, as well as many other illnesses.
The Association of British Insurers (ABI) sets a standard definition of each condition in their statement of best practice for insurers on Critical Illness Cover.
In recent years, insurers have introduced ‘severity-based’ cover. This means policies pay out a percentage of the sum assured, depending on your diagnosis. They still provide cover for more serious conditions too though.
Depending on your illness, some conditions will give a partial payout of 25% or 50%. This includes early diagnosis of certain cancers. Some stages of cancer are not included at all because they’re easily treatable. A mild stroke or mild heart attack may not be considered serious either. It’s worth checking what exclusions are in your policy small print.
3. Do you need critical illness cover?
Everyone’s free to decide if they want to buy a policy. But people who do like the reassurance that they and their family will get some financial help if they become ill. So it’s worth considering if:
- You don’t have critical illness cover through your work. Most employers only offer life insurance (which only pays out when you die). Experts say you are six times more likely to claim under critical illness than life insurance.
- You’ve not got enough put away to cover your mortgage and bills if you become very ill and unable to work.
- You’re self-employed or your employer doesn’t pay out under its long-term sickness absence policy
- State benefits won’t be enough to cover your income.
4. What if you have a pre-existing medical condition?
Many insurers ask you to undergo a medical examination first. It’s always important to be 100% honest about your health record.
Most policies don’t cover you for illnesses or complications due to pre-existing medical conditions. So always give your insurer as much detail as possible.
If you don’t, you could find you get no cover when make your claim. For peace of mind, it’s worth paying a higher premium to know you’re covered.
5. How much does critical illness cover cost?
The cost of your premiums will depend on the insurer and type of cover. Your age and medical history will also be a factor.
You’re likely to pay lower premiums if you don’t have any pre-existing medical conditions. If you have family members who have suffered from serious illness, this will make a difference too. If you don’t smoke, you’ll also pay less.
When you take out a policy, it’s usual to set a period of time before you can make a claim, for example, 3 or 6 months. The shorter the period, the higher the premium.
6. What kind of policy should you take out?
It’s worth taking independent advice on this. So you don’t end up with more cover than you need and avoid higher premiums. A basic policy may be all you need.
Weigh up the benefits, costs and restrictions of a range of policies to pinpoint the one that’s right for you.
Also look at if the premiums are fixed. If they are, then what you’ll pay to keep up the cost of cover won’t change, which makes things simpler. Not all policies have fixed premiums though.
Would you like your children to be covered? Many policies include cover for children. So if, worst case scenario, your children fall ill, they’ll be covered and you’ll get a lump sum payout.
7. Why does it sound as if the insurer will do everything to avoid paying out
Insurance companies have to publish information about their claims and it’s worth taking a look at the information. Records kept by the Association of British Insurers (ABI) show that payouts for critical illness claims have been improving over the years.
In 2016, critical illness claims hit a record 15,464, with 92.2% of claims paid out at an average value of almost £68,000. Cancer accounted for almost two-thirds of claims. This was followed by heart attack, stroke and multiple sclerosis.
Get the right critical illness cover for you
So getting the right cover for you is a personal thing. It’s well worth taking independent advice to get the right policy. Then you can make sure you’re insured for all your needs. And that you're not paying over the odds for cover you actually don’t require.
Would you like to discuss your situation in confidence? Our expert advisors can help you decide if critical illness cover is right for you here.
