Critical Illness Cover helps limit the financial impact of suffering a serious illness by paying out a tax-free cash lump sum. If you are unfortunate enough to suffer from a critical illness your life is likely to be suddenly turned upside down and this pay out can give the freedom to focus on your health and not your finances.
The funds could be used to pay for:
- care, operations and treatment
- adapting your home if you become disabled
- repaying your mortgage and other debts
- meeting the family’s monthly outgoings
All Critical Illness Insurance providers cover the three core conditions of cancer, major heart attack and stroke. However, different policies cover different illness and like with many things, cheapest isn’t always the best option as you ultimately get what you pay for.
A more comprehensive plan will have a long list of illnesses covered whilst having a broader set of policy definitions and our expert advisors will help you choose the best cover to maximise the likelihood of making a successful claim.
How Does Critical Illness Cover Work?
- When taking out a policy, you choose how much cover you require and over how long.
- If you suffer from a critical illness and make a claim, the insurer will need to check that your diagnosis meets their definitions
- Upon acceptance of the claim, the insurer pays out and if your illness is severe enough to receive the full sum assured, the policy then terminates.
Get a personalised quote from one of our expert Critical Illness Cover advisors
A Critical Illness pay out can be taken as a monthly income but the majority of policies are arranged as one of the following lump sum cover types:
Level Term Insurance
The sum assured stays the same throughout the chosen term, giving the reassurance of knowing exactly how much will be paid out regardless of when a successful claim occurs within the policy period.
This is typically taken out to provide a set level of financial security.
Decreasing Life Insurance
With decreasing cover the sum assured reduces throughout the term of the policy. This is primarily arranged to pay off a repayment mortgage.
As a mortgage reduces throughout the term the Critical Illness Insurance sum assured decreases roughly inline with the debt. Because the amount of cover provided by the insurer decreases over the policy term, the premiums for decreasing cover are usually lower than for level cover.
Increasing/Index-Linked
An increasing term policy is effectively level cover with an option to have the sum assured index-linked, meaning that it will increase throughout the policy term. This is primarily arranged to ensure that the cover amount is not eroded by the effects of inflation.
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Many insurers also offer cover for your children if they are diagnosed with a critical illness. The potential pay-out varies between providers and is typically between £10,000 – £25,000 although it can be up to £100,000. If this benefit is paid out, it will not affect the overall sum assured or other future successful claims.
Partial Payments
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Many critical illness policies also provide cover for less severe conditions, which are usually known as Partial Payments. Diagnosis of one of these conditions could result in a potential payment of up to £25,000 – £30,000, dependent upon insurer.
These partial payments form an essential part of modern plans and there are many differences between providers as to the number of partial pay-outs they insure. Likewise, some providers offer far more comprehensive policies through advisors than to the general public or comparison websites, so always arrange your critical illness policy through as experienced advisor who can show you the differences.
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