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What is critical illness cover?

What is critical illness cover?

Category: Insurance
Author: Leanne Macardle
Updated: 11/01/2017

Insurance is all about being prepared for the unexpected, and one of the things that we should probably all be prepared for – despite it being something that no-one likes to think about – is being diagnosed with a critical illness.

If you were to be given such a diagnosis, what would happen to your finances? Would you be able to cover your mortgage payments if you were unable to work? What about medical bills, or if you needed to make alterations to your home? A critical illness could have a huge impact on your family and your finances as a whole, and that's why having suitable cover is vital.

What is a critical illness?

Quite simply, a critical illness is a serious illness or disease that's life-threatening. This will typically include heart attacks, cancer and stroke, but the diagnosis will usually need to be sufficiently severe to be classified as critical. In practice, however, a lot of insurers will include a range of other conditions in their definition of "critical", ranging from Alzheimer's disease and organ transplants to permanent loss of speech, liver failure and blindness.

What will critical illness insurance cover me for?

In a nutshell, critical illness cover (otherwise known as critical illness insurance) will provide the necessary financial protection should you be diagnosed with a serious illness covered by your policy.

Unlike income protection plans, critical illness policies provide a tax-free lump sum that can be used to pay off your mortgage, make alterations to your home, clear your debts, cover medical bills or pay for anything else that could be necessary – essentially, it'll ensure you have the funds in place to make sure an already stressful situation isn't made worse by lack of cash, giving you the financial security you need.

As with any type of insurance policy, you need to make sure you've got the level of cover required. It'll only pay out if you're diagnosed with an illness that's specifically stated in your policy, but most will also pay if you've been left permanently disabled by an illness or injury.

While some illnesses will generally be covered as standard in these kinds of policies, such as heart attack, stroke, certain types of cancer, bypass surgery or multiple sclerosis, all insurers will have slightly different options. You can opt for more comprehensive policies, too, which will offer a higher level of cover for the trade-off of higher premiums.

However, some illnesses won't be covered at all, such as certain cancers or "chronic" conditions that aren't necessarily life-threatening, and you generally won't be covered for any health conditions you had before you took out the policy, either.

It's a one-off insurance, and once it pays out, the policy ends.

Why might I need critical illness insurance?

Having critical illness insurance will always be a personal decision, but if you don't have sufficient savings that could support you in the event of a diagnosis, it may be worth considering this type of cover.

Don't always assume that state benefits will be able to provide the necessary cover, as these will invariably be less than you think and could mean you would find it difficult to cope financially if you were out of work.

Having said that, if you do have sufficient savings, if your partner could support you and cover household costs, or if you've got a good employee benefits package that would provide financial assistance in the event of being unable to work, you may not need this kind of cover. It's all down to your individual circumstances, but if you think you may need it even on the off-chance, it could be invaluable should the worst happen.

Choosing the right critical illness policy

If you think you may want to consider this kind of policy, choosing the right one is vital. There are various different types to choose from, whether you want an individual critical illness policy or one that's linked to your life insurance, and again it all comes down to your circumstances.

Make sure you compare the options thoroughly and ideally seek the advice of professionals to ensure you find the cover that's right for you, and of course, make sure you know exactly what illnesses you'd be covered for. Despite industry attempts to standardise terms, insurers vary in terms of what they cover and the conditions that go along with it, so make sure to go through everything carefully before you make your final decision.

What next?

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.