Critical Illness Cover
Critical illness cover is often sold as an add-on to life insurance, and is sometimes regarded as unnecessary, but you ignore it at your peril. Critical illness cover brings security to you and your loved ones, paying out a tax-free lump sum to cover the costs of ongoing care, or your mortgage if you still have one, and replacing your income for your family. Similarly to life insurance, you are transferring liability for you and your family’s future financial security to a third party for a minor payment each month. A big result for just a small premium.
What qualifies as a ‘critical illness’?
This is a challenging question, as the definition of critical illness may differ slightly between providers, and individual policies may cover certain illnesses, while others will not. It’s always best to check thoroughly what a policy will cover. There are commonly thirty-six conditions classified as ‘critical illness’, which include bone marrow failure, forms of meningitis, heart conditions, blindness, brain damage and disease, aggressive cancers, coma, deafness, liver or kidney failure, amputation, loss of speech, organ transplant, multiple sclerosis, respiratory failure, stroke, third degree burns, terminal illness and more. Your policy provider should give you a full, detailed list if you request it. Different insurance companies will define critical illness in slightly different ways, and we will review with them to establish exactly what a policy will cover.
Am I too old or infirm to take out critical illness cover?
We believe in ensuring you are aware of any shortfalls in your financial planning, and making sure you are prepared in the case of an unfortunate eventuality. It’s up to you do make the necessary plans within your power to support your family, and it is not our place to tell you whether you are too old or infirm. Again, much depends on your family’s individual circumstances. If you feel the premiums for a policy would be too expensive to justify, then you may want to take a view on the risks versus the possible returns, or look at ways to reduce your premiums such as giving up smoking.
Could a provider refuse to provide critical illness cover?
Yes, under certain conditions. They may perceive the risk of critical illness is too great for them to take on the liability, or the applicant may be at a high risk of a recurring illness that has gone into remission but may return. We’d never make an assumption that you would be declined critical illness cover, as advances in medical science mean terms and conditions of policies keep changing. It’s always worth finding out the full picture. Some people are also concerned that it is difficult to get a provider to pay out in the case of a claim. This is a bit of an urban myth – in 2016, insurers paid out in 92.2% of cases, on average. Of the small fraction where they did not pay out, this was typically for reasons of non-disclosure of an existing condition, or not meeting the criteria of the policy.
What if the lump sum paid out doesn’t cover my ongoing costs?
This is sadly a problem of the policy-holder’s own making. Prior to taking out the insurance, they should have done their due diligence and properly researched what sums they would need to cover in the case of them becoming critically ill, and what shortfall they would have in their finances. Then they would have known exactly how much insurance they needed to buy. We are very concerned that people plan and find out how much insurance they need. You might need to ensure income is replaced, a mortgage is covered, costs of ongoing care are catered for, and perhaps adjustments to vehicles and homes to accommodate a new condition. It pays to think ahead and plan for every eventuality.
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