Critical Illness Insurance
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Critical illness insurance helps protect against the financial impact that a serious illness could have on you and your family.
How does critical illness insurance work?
Critical illness cover pays out on diagnosis of one of the serious illnesses covered by the plan. You usually have to survive for at least ten days following the diagnosis, although some providers state 14 days instead.
You can choose the amount you are covered for and whether you want a level, decreasing, or increasing amount of cover.
Level cover
Level cover means the amount you are covered for doesn’t change, and a successful claim will result in that amount being paid out as long as the policy is still active. You might be 35 and choose to be covered for £100,000 until age 70. Whether you are diagnosed at age 40 or age 60, £100,000 will be paid.
Decreasing cover
Decreasing cover is generally used in line with a repayment mortgage as the amount you need to pay the mortgage off decreases with each payment you make. As the amount paid on a claim reduces over time, and eventually dwindles to nothing right at the end, it is typically a cheaper option than level cover.
Increasing cover
Increasing cover looks to combat inflation by adding a bit to the amount you are covered for each year. Your premium will go up as well to reflect that. It’s often used to protect your family and to cover a Help to Buy equity loan.
Is critical illness cover worth it?
If you get really sick without warning and don’t have savings, the money you get from your critical illness insurance can help cover things like your monthly bills and childcare costs.
If you have debts to pay off, like a mortgage, you might be able to pause payments for a while, but that can’t last forever. That’s when the money from your insurance can step in.
You might have to adapt your home, too. Making changes to your home to make it easier to live with your condition can cost a lot of money. Most people don’t plan for these unexpected expenses, so the pay-out from your critical illness insurance can really make a big difference.
Is money from critical illness insurance paid as a lump sum?
Often the money is paid as a lump sum but there is a special form of cover known as family income benefit that will look to pay on a monthly basis instead. The policy needs to be set up on this basis from the start.
What illnesses would I be covered for?
That depends on which provider you take cover out with.
The main critical illnesses are cancer, heart attack, stroke, and MS. Most plans will also cover you for things like loss of a limb, organ failure, and neurological conditions like Parkinson’s and Alzheimer’s.
The key thing to remember is that each provider has a set definition of when the illness becomes critical. It has to meet this definition before you can make a successful claim. It can be worth paying a bit more to get cover with a provider that has more lenient definitions.
Some policies will provide you with an additional payment for less advanced cases. Your standard cover remains unaffected, and should your condition worsen to such an extent that it meets the provider’s definition, you can still claim for the full cover amount.
Can I cover my children on my policy?
If you have children, you can cover them on your plan.
Some providers include this as standard, whereas others charge a bit extra.
Children are usually covered until their 18th or 21st birthday, depending on the provider. Some might extend this further if the child is in full-time education.
Children typically won’t be covered for the same amount as you are. It’s often the lower of an amount set by the provider or a certain percentage of your cover amount.
Can I get critical illness insurance after a diagnosis?
Possibly, yes.
Providers ask a series of medical-related questions as part of the application process, so if you’ve been diagnosed with a condition you need to disclose it. If you don’t, the policy could be void.
Pre-existing conditions are either accepted at normal rates, accepted but at a higher price, or excluded from the policy completely.
If a period of time has passed without you having to see a doctor or medical professional for the condition, and you aren’t experiencing symptoms or having any treatment for it, it might be possible to obtain cover for that condition. For example, some providers can look to cover people for skin cancer who have had it before, subject to certain conditions being met.
However, if you want to take out a policy hoping to get a pay-out for a pre-diagnosed condition, that wouldn’t work.
How long do I need to have critical illness cover for before I can claim?
In theory, you could claim straight after taking the policy out. Depending on what you want to claim for, the provider may question whether or not you have been honest on the application form. They will seek medical evidence to verify your claim.
You need to declare any conditions you have been diagnosed with, as well as mention anything you’re having symptoms of, awaiting or undergoing tests for, or intend to speak to a medical professional about.
What does critical illness cover cost?
That depends on a number of factors, such as:
- Age
- Smoker status and health
- Occupation
- Height and weight
- Medical history
- How much you want to be covered for
- How long you need to be covered for
Is the money from a claim taxed?
If you pay the premiums from your own net income then any money received from a successful claim is not currently subject to income tax.
It will, however, form part of your estate for inheritance tax purposes.
Please note that tax laws can change at any time.
Can I claim critical illness and still work?
Yes. Whether or not you can work doesn’t really concern the provider. As long as the condition meets their definition, and you haven’t missed anything off the application form that you should have mentioned, you should be able to claim.
How can The Mortgage Store Chorley help with critical illness cover?
We understand the peace of mind provided by having the right policies in place.
We’ll conduct a thorough review of any existing policies you have. If you’re employed, you might also have cover through work. Check with your employer to find out what you’re covered for and whether your family will benefit from it if you claim. If workplace cover doesn’t provide enough for your needs, a separate policy might be necessary.
Once we can see your current level of cover and understand what your priorities are, we’ll work with you to put an appropriate insurance plan in place.