May 16, 2023
Since we’re generally living longer, our need for financial security is increasing, and one of the ways many people choose to protect their finances is through critical illness cover.
We’ve found that there’s often a bit of confusion around the different types of financial protection available – like life insurance, income protection and critical illness cover – and sometimes there’s some scepticism about whether these different policies are worth the outlay.
They’re each designed to provide different types of protection, and whether you need them depends very much on your particular circumstances.
In this article we look at critical illness cover, and answer some of the most common questions we get asked.
Critical illness cover is an insurance policy designed to provide a lump sum of money if you become seriously ill from a specified condition or suffer from a life-altering injury.
This type of insurance usually covers very serious and long-term conditions with the most common claims being for cancer, heart attack, or stroke. The list of conditions covered is very specific so it is important to read and understand the policy conditions.
The amount of critical illness insurance you need varies depending on your individual circumstances, which is why it’s important to speak to an IFA to ensure that you get the cover that’s right for you.
You might want to keep cover in place only until your mortgage is paid off, for example, or until you are able to start drawing on your pension.
How much cover you need depends on what financial outgoings you need to cover, and for how long. As a rough guide, calculate your monthly outgoings (add a buffer for additional expenses should you fall ill – like hospital travel, or higher utility bills to run medical equipment) then multiply by the number of months/years you’ll need the cover to run for.
The monthly premium will depend on your age, any existing health issues, how much you smoke and drink, and other lifestyle factors like your job or leisure pursuits. In addition, the policy duration, amount of cover and the range of illnesses included will all play a part in determining the cost of this type of policy.
Generally speaking, the younger you are when you purchase a policy, and the healthier your lifestyle, the lower your monthly premiums will be (although other specific factors can affect your premium as noted above).
Again, the answer will depend on your circumstances. You might already have a life insurance policy which includes critical illness cover, or you might be fortunate enough to be covered by an employer’s policy.
If you’re relying on an employer’s policy, though, be aware that you can’t transfer this kind of benefit – so if you change jobs, you’ll need to arrange cover yourself. Since cover gets more expensive the older you are when you start the policy, or if you have already had any significant health problems, it could be more cost-effective to take out your own cover too.
If your household doesn’t rely on income from you working, or if you have significant savings to fall back on in the event of illness, you may decide that you don’t need to take out cover at all.
Before making a decision, it’s important to ask yourself a few key questions such as:
By answering these questions, you will be able to better understand your family’s current and future financial context and choose a policy accordingly.
Most critical illness policies will cover cancers, heart attacks and strokes as a minimum however with improvements in medical science some treatable conditions may not be covered. Depending on the insurer, you may be able to get cover for more than 50 conditions or medical needs including organ transplants, blindness, and deafness.
Most insurers will also offer the option to include additional cover for your children.
When people ask us that, what they usually mean is ‘will a policy actually pay out if I do get sick?’.
You might be interested to look at some figures from LV=, one of the UK’s major insurers. (There are dozens of UK insurers offering critical illness cover. We’re not recommending LV= in particular – it just so happens that their 2022 report landed in our inbox as we were writing this blog.)
In total, LV= reported having paid out almost 95% of protection claims in 2022 (this includes other types of protection policy like income protection).
LV= paid out more than £28m in Critical Illness claims in 2022 to more than 360 individuals and families, with the highest payment being more than £400,000. Cancer accounted for 56% of all critical illness claims, followed by heart attack (14%) and stroke (7%).
Almost six out of 10 claims were made following a cancer diagnosis, with breast (24%), prostate (14%), bowel (13%) and skin (10%) accounting for most claims. In addition LV= paid a total of over £544,000 for 25 claims involving children from newborn to 17 years old.
You can find their full report here:
Critical illness insurance provides financial help for you and your loved ones when it is most needed, and when the last thing you want to be worrying about is money.
With the right advice, you can put in place affordable cover that will give you the peace of mind that your financial needs can be met in the event of something unexpected happening.
To discuss whether a critical illness policy is right for you, and the level of cover you need, get in touch with one of our IFAs, who’ll talk you through your options.
We will research the whole market to recommend the cover that best meets your needs and circumstances, and you may be surprised at how affordable peace of mind really is.
At Talis IFA we’ll give you honest, transparent advice. We’ll never recommend a policy or level of cover that you don’t need, and will talk you through all your options in full to make sure you are able to make an informed decision. Click here to find a Talis IFA.
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