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Critical Illness Cover

What is it?

A critical illness policy will pay out a tax-free lump sum if you are diagnosed with certain serious illnesses or disabilities. These policies are not designed to replace your income and will only pay out once, usually one month after diagnosis. 

What is a ‘Critical Illness'?

All policies should cover:

In May 2003 the conditions under which customers could make a claim were tightened. Certain conditions are no longer covered such as non-invasive skin cancers and less advanced forms of prostate cancer. Heart conditions such as angina are not covered.

Critical illness is a complicated diagnosis and policies are extremely specific about what is or is not covered. It is important, therefore, that you make sure you are adequately covered for your needs. If you have a family history of certain types of cancer for example you will probably need to make sure that this is covered in your policy.

Most insurers will provide a plain English guide to the policy as well as a Key Facts document. It is important that you read these carefully so you understand the policy and your cover.

Do I need it?

Serious illness affects around one-in-four people before they reach retirement age. If you have a major financial commitment such as a mortgage it might give you peace of mind to know that if you find yourself unable to work due to extreme ill-health you will be entitled to a payment that should clear your mortgage.

If you already have life cover and accident, sickness and unemployment insurance (ASU) you may think that critical illness cover is unnecessary. However, life cover only pays out if you die and ASU will generally only pay out for one year. Many people are diagnosed with critical illnesses but continue to live for many years.

If you live alone, with no dependants, you will probably find that critical illness cover is more useful than life cover as it will leave you with fewer bills in the event of serious illness, thereby improving your general quality of life.

How do I arrange cover?

Most lenders have their own products that they will talk to you about at the time of taking on a financial commitment, such as a mortgage. However, as with any other finance or insurance product it might be beneficial to shop around for the best deal. Eden Finance Ltd has access to the entire market and can help find the best product for your needs. To discuss your requirements with one of our trained and experienced advisors please call on 01908 622 300.

Cover is usually available for people between the ages 17 and 70 and can be for a fixed term, such as the term of your mortgage, or for life.

You will be asked at the time of application about your medical history as well as that of your direct family and any pre-existing illnesses. If you have any significant history of illness you may find that your premiums are higher or that certain conditions are excluded from cover.

Exclusions

You cannot usually claim within three months of taking out cover or for pre-existing conditions.

Certain illnesses are never usually covered such as HIV / AIDS, illness relating to drug abuse and self-inflicted injury.

How much will it cost?

Advances in medical technology have increased the chances of surviving a critical illness and, as a result, premiums have risen significantly over the last few years. This rise will continue as technology continues to develop and some conditions may cease to be covered at all.

If you are a smoker premiums will probably be higher.

If possible choose a policy with fixed premiums as although these may initially be more expensive it will probably be cheaper in the long run. However, many lenders no longer offer fixed payments.

How much is it worth?

The payment is usually a one-off tax-free sum, ranging from between £100,000 to £250,000. You will usually receive the payment within one month of your illness being diagnosed or within six months of any permanent disability.

Payments are only made to survivors of illnesses and the length of time necessary to live after diagnosis ranges from 14 days. You might want to choose a policy with a short survival period to ensure you will receive payment in the event of serious illness on which your dependants will benefit.

In conclusion

As with all insurance and financial products it is important that you receive impartial, independent advice before making any final decisions.

Critical illness cover policies can be highly technical and it is important you are aware of all the small print before choosing a policy or you may find that your cover is not as comprehensive as you may think.

If you would like to talk though your requirements with one of our trained and experienced advisors you can call us on 01908 622 300 and we will be happy to talk you though the details of all relevant policies.

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