What is critical illness cover?
Critical illness insurance will pay out if you get one of the specific medical conditions or injuries listed in the policy. Don’t confuse critical illness cover with life insurance, although they are sometimes sold together.
Every year, 1m workers in the UK unexpectedly find themselves unable to work because of injury or illness.
Examples of critical illnesses that might be covered include:
stroke
heart attack
certain types and stages of cancer
conditions such as multiple sclerosis
Most policies will also consider permanent disabilities as a result of injury or illness.
It only pays out once and then the policy ends.
Some policies will make a smaller payment for less severe conditions, or if one of your children has one of the specified conditions.
It’s worth remembering that certain lifestyle choices could affect the price of your premium. If you’re a smoker, you will generally find yourself paying more than non-smokers. When it comes to critical illness cover, the difference can be significant.
Do you need critical illness cover?
State benefits might not be enough to replace your income if something goes wrong and you can’t work because of long-term sickness or disability.
If you’re eligible, Employment and Support Allowance ranges from around £70 to just over £100 a week, depending on your circumstances and the seriousness of your illness or disability.
Your broker will recommend getting critical illness cover if:
you don’t have enough savings to tide you over if you become seriously ill or disabled you don’t have an employee benefits package to cover a longer time off work due to sickness.
If you don’t have significant savings, critical illness cover can provide valuable financial support in the event that you become seriously ill.
Your lump sum pay-out could be used to cover some of the following costs:
All or part of your mortgage
Lost earnings while unwell
Household bills and other outgoings
Private medical care or specialist treatment
Even if you don’t have dependants your broker may recommend need cover. If you live on your own, for example, you will need to ensure any rent or mortgage commitments are paid each month.
The last thing you want is to have to worry about keeping the roof over your head when you are unwell, recovering from injury or adapting to incapacity.
The longer you wait to add critical illness cover, the higher the cost - and it rises dramatically once you’re over 65. The average cost of a decreasing policy with critical illness for someone aged 30 to 35 is £31.29, but it almost quadruples to £124.49 once you hit 46 to 65 years old.
What will my broker consider when recommending a critical illness policy?
Level of cover
Although cost will obviously be a factor when choosing a critical illness policy, the cheapest option may not necessarily be the best. It’s vital that you have a policy which provides a level of cover sufficient for your specific needs.
Some policies can offer additional benefits. These can include mastectomy cover, low grade prostate cancer cover, or accidental hospitalisation benefit. All of these may pay out smaller lump sums if you qualify, without affecting your overall benefit.
Policy add-ons
Policies that seem to cover very unusual illnesses may not be worth paying over the odds for, as you are less likely to claim for one of these conditions.
Many critical illness policies automatically include total and permanent disability cover, it also might be recommended by your broker as an extra for which you will be charged an additional premium.
If you opt for this cover, it will pay out for any condition which leaves you totally and permanently disabled, even if that condition isn’t listed within the policy.
Protection for children
If you have children, then your broker will suggest you consider adding children's critical illness cover to your policy. This will usually pay out a small lump sum, typically between £15,000 and £25,000, if your child is diagnosed with one of the illnesses specified on the policy.