Critical Illness Cover Explained

Being diagnosed with a critical illness is usually quite traumatic. When the individual realizes that work is no longer an immediate possibility, the trauma changes to worry.

critical illness cover

How will the family afford the current lifestyle? If the individual does not have a family, panic often sets in because there will be no means of financial support.

Thinking about having to sell their assets, including their home, is more than most people can handle when they are well. If they are critically ill, the thought alone can send them to an early grave. Fortunately, critical illness cover is available to address financial concerns resulting from this diagnosis.

A stroke, heart attack, and cancer are three of the many serious illnesses that can render a person unable to work. With one less income, the family may struggle to make ends meet.

If the ill person is the only source of income, drastic lifestyle changes may be required. Most critical illness diagnoses are unexpected, leaving affected individuals unprepared for the ramifications. With critical illness cover in place, they receive a lump sum payout upon the diagnosis of a serious illness that threatens their life.

How Critical Illness Plans Work

A critical illness plan is designed to pay out when the insured is diagnosed with a serious condition included on a list provided by the insurance company. Heart attack, cancer, paralysis, stroke, coronary artery bypass surgery, and a major organ transplant are usually on this list.

Total or permanent disability may also be included as a subset of this coverage. A typical critical illness policy covers approximately 35 conditions. However, only three broad categories are currently required to be included in a basic policy: advanced stages of cancer, strokes, and heart attacks causing permanent symptoms.

To receive payment, the insured must live for at least 14 days following the diagnosis. The lump sum is tax-free and can be used to pay living expenses, medical bills, debts such as a mortgage, or to adapt the home to accommodate impaired mobility or incapacitation. This money allows financial commitments to be met so policyholders can focus on treatment or recuperation without being concerned about supporting their family or themselves.

Premiums are based on age sex, occupation, health, smoking status, level of coverage, and length of coverage. If one of the covered illnesses runs in your family, expect to pay higher premiums. Premiums are usually fixed for a period but some policies feature flexible premiums, allowing the insured to increase the coverage level as needed.

Spouses can buy a joint policy that covers both of them. However, some policies only cover the first person to be diagnosed with a critical illness. There are also policies that cover dependent children when they reach a particular age.

Since the cash payout may be used for any purpose, many people choose to apply it to their recovery. The money can pay for treatments that are not provided by the NHS, holistic therapies, or to purchase special therapeutic equipment. By shortening their recovery time, policyholders are able to get their life back to normal. If returning to work following an injury or illness is not possible, an included total and permanent disability (TPD) clause may kick in and provide a lump sum payment.

Opting Up With Cover

Different levels of critical illness cover are available and the more comprehensive the plan, the more conditions that are covered. Total permanent disability (TPD) cover is included in these opt-up plans. This makes a lump sum payment if an illness or injury renders an individual permanently unable to work.

Consumers should verify whether TPD and critical illness payments are mutually exclusive. Since many basic policies include more than the three broad categories required by law, consumers should review basic plans before exploring options that are more comprehensive.

A critical illness policy is usually sold in conjunction with life insurance, offering a comprehensive package of protection. This means that consumers must compare both types of plans when shopping for coverage. Some bundled offerings are less expensive than purchasing the products separately. However, they may only pay out once so if the insured becomes seriously ill and then dies within a few months, a payout will not be made upon death.

Comparing bundled packages is more complex, so it is important to devote sufficient time to the comparison. Read the terms, conditions, and exclusions to make sure that the bundled package covers exactly what is needed. Using our site eliminates the need to scour the Web for policies because we do that. You simply read and compare the information we provide and make a decision.

When is a Critical Illness Policy Recommended?

People who do not have secondary sources of income or a large savings account balance can benefit from purchasing critical illness insurance. Though this policy represents a gamble that a critical illness will occur, it is a safe one because we never know when illness will strike.

There are far too many stories of people being financially unprepared to handle being out of work due to critical illness. The amount of coverage to purchase depends on personal circumstances and is based on the amount of money needed to continue the lifestyle and make any necessary modifications.

Income Protection Insurance Alternative

A person with enough cash to cover lump sum payments required upon serious illness diagnosis may want to consider income protection insurance instead of critical illness. This provides a steady payout during the period that an individual is unable to work for any reason, subject to a few exclusions. The insured need not be permanently disabled to take advantage of this benefit. Consumers can select from a variety of income protection plans with different waiting periods and premium types.

Though no one wants to think about becoming critically ill, it is comforting to know that critical innless cover is available. People should assess their budget and savings to determine if this policy would benefit them. The lump sum payment provided upon diagnosis of one of the defined serious illnesses may provide much-needed financial relief.