Critical illness insurance, like any other insurance, is designed to help ease the burden of a financial crisis in the case of a severe illness diagnosis or disability. For many, the prospect of no longer being able to work and needing to finance specialist equipment and/or help could seem like a frightening prospect, especially if you have dependants. Insurance is there to help you and your family with a tax-free lump sum that could help pay towards treatment, services, equipment, bills and any other financial burden.

Many policies will offer a combined life and illness cover which will pay out either upon your death or upon the diagnosis of a severe illness, whichever comes first.

Why do I need Cover?

Figures released by the Munich Re Group in 2002 revealed that 1 in 3 men and 1 in 4 women between the ages of 40 and 70 will develop a critical illness including cancer, heart attacks, strokes, coronaries and MS. These figures don’t include those who suffer permanent disabilities after disease or accidents, so with such alarming figures it seems pertinent to think that everyone should consider getting critical illness cover.

The financial implications of any debilitating illness can be catastrophic. A lump sum could pay off at least some of your mortgage and you wouldn’t have to rely on the charity of friends and family. At such times of emotional distress the realisation of financial hardship can prove to be hard to bear and can even add to the stress and anxiety caused. Having a lump sum awarded in the case of sudden illness can provide a useful safety cushion.

What is Covered?

Individual policies differ with each provider but all policies cover the most common conditions of cancer, coronary bypass, heart attack, stroke, major organ failure and MS. A more comprehensive policy will also cover things such as the loss of a limb or one of your senses through accident or illness.

The Association of British Insurers introduced a set of guidelines in 2011 which have made policies more transparent and easier to understand which means that you should know exactly when your policy will pay out and what for. As with any insurance policy it’s always best to check the small print, especially in finding out about any restrictions and exclusions.

It is also worth mentioning that critical illness policies usually only settle a claim after a period of 28 days, known as the ‘survival period’.

What is Not Covered?

The most common exclusions are self inflicted injuries, HIV and AIDS related illnesses (unless as a result of assault, blood transfusion or accident at work), injuries suffered during criminal acts, illness as a result of ignoring medical advice and drug or alcohol abuse. In addition to these, most policies will also refuse claims which are the results of hazardous sports or hobbies – this also includes skiing so if you are a regular skier you might want to check your policy.

Insurers will also refuse to honour a claim if any information you gave during the application process was proven to be false or if you withheld important information.

What Do I Need to Declare?

Once you have chosen your provider you will be sent a proposal form to complete. This will ask you to list inherited and genetic conditions for your family and you may be asked to attend a medical. It’s vital that you are completely honest because should you ever need to make a claim, you can be sure that your provider will run through your medical history with a fine toothcomb. Don’t withhold information in order to bring down your premiums as it would be a complete waste of your payments if your claim was refused due to inaccuracies during your initial application.

How to Choose an Insurance Provider

  • Look out for what policies cover and what they don’t as cheaper premiums might involve more exceptions and restrictions.
  • Fixed premiums may be initially more expensive than variable premiums but could prove to be cheaper in the long run.
  • Don’t be afraid to ask providers for their best deals and compare quotes, but do bear in mind that your final quote may be dependent on your medical history.
  • An insurance broker such as may be able to find you the best deal on the market for a commission from the provider you choose. Whilst not as cheap as a discount broker, an independent insurance broker will have the experience and expertise to be able to offer sound & impartial advice, which could prove to be extremely valuable with a complicated insurance product such as this.
  • Alternatively you could use a discount broker to secure you a good deal. They can offer cheaper monthly premiums by repaying any commission back to you in return for a one-off fixed fee but they do not offer advice. With products such as critical illness cover it is always recommended that you seek independent advice to ensure you choose a suitable policy which is likely to pay out should you submit a claim.

Finally, if you want to cut your risks and drastically reduce your premiums, then stop smoking, eat healthily and take plenty of exercise!

resources: For the official UK guidelines concerning which illnesses must be covered by a critical illness insurance policy please visit the ABI Website.

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