It is a sad fact that many of us will know someone who has suffered from a critical illness. Despite medical advances, critical illness is still all too common. Critical illness conditions include such things as cancer, heart attacks, strokes, multiple sclerosis, leukaemia, and total permanent disability.
Being diagnosed with a critical illness doesn’t only spell emotional and physical turmoil. It can also mean financial disaster. If you are unable to work due to a critical illness, or if you have to give up work to look after a child with a serious medical condition, you could quickly find yourself struggling to meet your financial commitments such as the mortgage and other regular bills. And all this at a time when you may be having to find additional money to pay for medical treatment or the costs of ongoing medical care.
With little support available from the State – less than £60 per week if qualify for Disability Living Allowance and just over £70 per week if you qualify for long-term Incapacity Benefit – you could soon find yourself in serious financial trouble.
Fortunately, there are steps you can take to help protect yourself from the financial implications of suffering from a critical illness. Whilst the doctors get on with their job of looking after your health, critical illness insurance can help you avoid worrying about money and leave you free to concentrate on getting better.
Critical illness insurance provides you with a substantial tax-free cash lump sum if you are diagnosed with a serious illness. Different policies cover different ranges of medical conditions, but the one thing they all have in common is that they will pay you your chosen level of benefit as a tax-free lump sum in the event of your being diagnosed with one of the insured conditions.
Providing critical illness cover for a sizeable sum is cheaper than you might imagine, and can make a huge difference to your quality of life in the event of a serious illness. For example, once your claim is paid, you could use the money to clear your mortgage or take a holiday to help aid your recovery.
It is easy to argue that anyone who has a mortgage should definitely take out critical illness protection, but the same can apply to anyone who has regular financial commitments that they would find hard to meet in the event of being unable to work following the diagnosis of a serious medical condition. In fact, in many ways, critical illness cover is even more important than life insurance, because, in this day and age, advances in medical science mean you are more likely to initially survive a critical illness than you are to die from it.
When you suffer a serious illness it can take a long time to recover. You may have to give up work completely to begin with, and it may be a number of years before you are fit enough to return to full-time employment. If your illness leaves you with a permanent disability you may have to change career, thus leaving you with a lower salary than prior to your illness.
When deciding what level of critical illness cover to opt for, there are a number of factors to take into account. If you were in a position where you were unable to work for a number of years after your illness, then you might need to live off your illness benefit for longer than expected. Therefore, it is sensible to try to cover a sum of at least four or five times your current annual salary. Remember to take into consideration your mortgage any other outstanding loans and credit card debts when deciding on a level of cover.
All critical illness policies have what is known as a survival period. This is the length of time after you fall ill before your claim can be processed. This is normally in the region of two to four weeks. Then the insurer will need to gather medical evidence and reports from your doctors to ensure the validity of your critical illness claim. This process can take a few weeks depending on the amount of information required. The insurance companies who provide critical illness cover have specialist medical claims staff who will make every effort to get your benefit paid to you as quickly as possible.
In addition to providing critical illness protection for yourself and your partner, it also makes sense to add on cover for your children if you have any. Unfortunately, serious illness amongst children is more common than you might like to think. Historical claims records show that a substantial number of claims are made on children’s illness insurance, mostly for leukaemia.
You might assume that if one of your children suffered a critical illness, your household finances would be unaffected. After all, they are not wage earners. However, in reality, you may want or need, to give up your full-time employment to look after your child. In addition, their illness may give rise to additional costs for medical treatment or nursing care. Money is the last thing you want to be worrying about if one of your children is taken seriously ill.
A large number of critical illness insurers automatically provide cover for children, so it is worth checking this aspect of the policy when deciding which critical illness provider to opt for.
One of the most important things to be aware of when choosing a critical illness protection plan is the list of illnesses and conditions covered by the policy, as this varies from one insurance provider to another.
All providers cover a certain range of core conditions, such as cancer, stroke, heart attack, and multiple sclerosis. Other companies may provide cover for additional conditions such as loss of sight, loss of limb, or benign tumours. Statistics show, however, that the majority of claims are for one of the core conditions, which every insurer has to cover.
Critical illness insurance can be bought with either guaranteed rate premiums or reviewable rate premiums. The former are normally more expensive, but the premiums are guaranteed to remain the same throughout the life of the policy. With reviewable rates, the premiums are not guaranteed and so you may have to pay more or less per month (almost certainly more!) as the years go by.
Critical illness policies stay in force for a fixed period. The period of cover you select is known as the term. A short-term policy might run for perhaps ten years. Or you might want a longer-term policy of twenty-five years to coincide with your mortgage. It is important to remember that your cover will end completely as soon as the term is finished.
The other two things which will cause your policy to terminate are if you die or if you make a critical illness claim. Once you have claimed for a serious illness, it can be difficult to get a new cover, as you are seen by insurers as a higher risk. Some companies offer a critical illness buy-back option, meaning that if you do claim on your illness policy you can still take out cover again with that same insurer. A buy-back facility will increase your monthly premiums, but for the sake of what may only be a few pounds per month, it is well worth considering from the outset.
As you will see from everything we have said here, critical illness policies can differ in price and provide differing levels of cover and benefits. In addition, some policies cover just illnesses, whilst others combine critical illness protection with traditional life assurance.
It is therefore important to take expert independent financial advice before deciding which critical illness policy is right for you.