Critical illness cover is a type of insurance that’s specifically designed to bolster your finances in the event you’re diagnosed with a condition covered by the policy. It provides a one-off tax-free payment that can help pay for your mortgage or rent if you’re unable to work, pay off lingering debts, or perhaps make necessary alterations to your home.
You’re only covered should you get one of the conditions listed in the policy – not all are included – and there may be severity clauses too, though some insurers will pay a smaller amount for less severe cases. The same can often apply if your child is diagnosed with one of the illnesses listed.
When you take out a policy you can choose how long it will last for and how much cover you want. It’s worth working out how much you and your family would need to live on if you were unable to work, such as how much it would cost to pay off the mortgage, clear debts and provide an income for a set amount of time. This can then provide the base amount for your policy.
You can also choose between various types of cover – you may want cover that will increase over the term to keep in line with inflation, or decreasing cover may be more suitable if your main concern is paying off a repayment mortgage. Then you’ll need to decide if you want a single or joint policy; the latter may prove cheaper for couples, but it’ll only pay out once.
Critical illness cover is typically sold alongside a life insurance policy (see below), though it can also be bought on a standalone basis. No matter what kind of policy you opt for, provided you keep paying your premiums, you’ll be covered throughout the term. At the end of it – or if you make a claim – protection stops, and you’re no longer covered.
