What is critical illness cover?
Critical illness cover is a type of insurance that provides a tax-free lump sum if you are diagnosed with a listed serious medical condition.
This cover offers peace of mind, ensuring that you and your family will remain financially secure if faced with a life-changing diagnosis. Common claims include cancer, heart attacks, and strokes, though many policies also cover other conditions such as multiple sclerosis.
Can you apply for critical illness cover after a diagnosis?
Yes, you can apply for critical illness cover once you have received a diagnosis.
However, you may find that this specific condition or illness is excluded from your protection, and you will pay increased premiums to account for the additional risk.
It’s crucial to be honest about your medical history when applying for critical illness cover. Failure to provide accurate information may result in claims being rejected due to misrepresentation, leaving you without coverage when you need it most. Being transparent ensures that your policy is valid and that future claims can be honoured.
Do I need critical illness cover?
If the worst were to happen, you would be thankful for the financial security provided by critical illness cover
Critical illness cover is especially important if you have children or other dependents who rely on you financially. Knowing that they will be supported if you are unable to work due to a serious illness can provide immense peace of mind.
Several life events often prompt people to consider critical illness cover, as well as life insurance and income protection insurance. Common triggers include taking out a mortgage, getting married or entering a civil partnership, or having a child, all of which increase the need for financial security.
When considering critical illness cover, ask yourself the following questions:
- How would a serious diagnosis impact you financially?
- What financial commitments do you have that you might struggle to pay if you couldn’t work?
- Could your partner support you financially during a long-term illness?
- Do you have any illness protection or benefits from your employer?
Additionally, the younger and healthier you are when taking out the policy, the lower your premiums will be, making it more cost-effective to sign up earlier.
What illnesses are covered?
Each critical illness policy will have a specific list of conditions it covers, typically including between 40-60 severe illnesses and 30-50 less severe conditions.
Some policies may also offer coverage for child-specific illnesses.
Most policies generally cover major conditions such as:
- Cancer
- Heart attacks and strokes
- Organ failure
- Loss of limbs, hearing, or sight
- Multiple sclerosis
- Alzheimer’s and Parkinson’s disease
Reviewing the list of covered conditions is important to ensure the policy meets your needs.
What types of critical illness cover are there?
There are two main types of critical illness cover, and for each, you can choose level, increasing, or decreasing cover:
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Standalone cover: This protects you solely for the illnesses listed in your policy. It is separate from life insurance.
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Combined cover: This integrates both life and critical illness cover into a single policy, often referred to as accelerated or integrated critical illness cover. However, you can only claim the main benefit once—either for a critical illness diagnosis or upon death.
Choosing between these types of cover depends on your personal needs and financial situation.
What is excluded from critical illness cover?
It is essential to understand both what is included and excluded in your critical illness policy.
- Illnesses not listed or those that don't meet the specific definitions outlined in your policy will not be eligible for a claim.
- With a standalone policy, you are also unlikely to be covered for a terminal diagnosis or death. These are typically covered by life insurance or a combined critical illness and life policy.
Carefully reviewing exclusions ensures that you are aware of any gaps in coverage.
Will critical illness insurance cover my children?
Many critical illness policies offer coverage for children.
Typically, these policies cover the same adult conditions with certain exclusions and may also include child-specific conditions, such as Down's syndrome. If your child is diagnosed with one of the listed conditions, you can claim a percentage of the overall benefit amount, usually ranging from 25% to 50% of the total benefit or £25,000, whichever is lower.
If you are also diagnosed with a covered illness, you would be entitled to claim the full policy benefit.
What is a 'terminal illness benefit' in life insurance policies?
Some life insurance policies include a 'terminal illness benefit', which allows you to receive your life insurance lump sum upon a terminal diagnosis, typically when life expectancy is less than 12 months. This differs from critical illness cover, which pays out upon the diagnosis of a listed condition, regardless of life expectancy.