Life can serve you unexpected curveballs at any moment. If these curveballs result in a financial burden for you or your loved ones, it can cause additional stress. Insurance products are available to help in your time of need. Insurance pay-outs can help cover the cost of financial stresses caused by your illness, including home adaptations and medical bills. In this article, we’ll explain what you need to know about one of these products: critical illness cover. We’ll explain what this cover is, reasons why it may or may not be suitable for you, and how we can help.
What is critical illness cover?
Critical illness cover is an insurance product offered as both a stand-alone protection, or as an add-on to life insurance. Pay-out is in the form of a tax-free lump sum. You’ll receive a pay-out upon diagnosis of a serious illness that prevent you from working. The list of serious illnesses may differ between providers. It may include certain cancers, strokes, Alzheimer’s disease, Parkinson’s disease and multiple sclerosis. Some exceptions may apply to the list, so it’s important to know what is covered by your policy. Terminal illnesses are also not often covered. Critical illness protection will not pay out in the event of your death – life insurance is more suitable in this instance.
There is often an upper age limit for eligibility with critical illness protection. This is typically 75 years of age. When applying for critical illness protection, you must declare any pre-existing health conditions, and may be required to submit your medical records. This may result in a higher monthly premium, or you may not be offered protection at all. The higher the risk of pay-out to the insurance provider, the higher you monthly premiums, typically. It is essential, however, to be honest about your health and family medical history. If it is determined that you knowingly withheld this information, it may result in no pay-out being made when required.
Your are able to make only one claim through the duration of your critical illness cover term. Once a pay-out has been made, the protection will cease. As the pay-out is in the form of a tax-free lump sum, it may be used to relieve financial pressures in any way. For example, you could use it to pay off your mortgage, pay for required medical equipment, replace your lost income, or for day-to-day expenses.
Why you should opt for critical illness cover
Critical illness cover may be suitable for you if you have dependents or immediate family relying on your income. If you are not able to work due to serious illness, day-to-day expenses still need to be covered, as well as larger, regular expenses. Your employer may offer sick pay, however this may be for a specified, restricted timeframe. You may move to Statutory Sick Pay* after six months of sick leave, for example. This reduced income may not be sufficient to cover your financial commitments. Whilst you may have some savings, these may not last long if you are unable to work due to sickness.
In each of the instances mentioned above, critical illness cover could ease financial burdens for yourself and your family.
Why it might not be suitable for you
There are some instances where critical illness cover would not be the most appropriate protection product for you. For example, if you have significant savings, or if your family does not rely on your income for regular expenses. Employers may offer critical illness cover as an employee benefit. This may extend to your partner as well as yourself.
Other protection policies may be more suitable to your need. Income protection, for example, gives a tax-free monthly pay-out. This covers you for a set period, and will pay replace part of your income whilst you are not at work. It also covers a greater number of illnesses than critical illness cover, though your monthly premium may be higher.
How Bell Mortgage Solutions can help
If you’re still not sure if critical illness cover is for you, it may be prudent to work with a broker such as Bell Mortgage Solutions. Those with a more complex medical history may find policies offered directly by insurance companies or banks to be more costly. There is a chance that the policy you choose may not cover all the elements you require. The Bell Mortgage Solutions team will consider your health and family medical history, along with financial factors. We will take you through the details of the different available protection products, identifying the most suitable protection policy for your needs. We’ll ensure you can make an informed choice.
Should we deem critical illness cover to be suitable for you, we’ll work with you through the application process too. We’ll assess with you how much you’d like as the pay-out lump sum, and how long you would like to take the cover for. This information will be used to determine how much your monthly premiums for the cover will be. Factors including your smoking history, health, family medical history and required cover level will all impact this monthly cost.
Contact us to make an appointment to discuss your protection product needs.
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The information contained within was correct at the time of publication but is subject to change.
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