Critical Illness Insurance
Critical illness insurance pays out a lump sum, which is tax free, if you are diagnosed with any of the critical illnesses specified in the policy.
Very often life insurance cover and critical illness cover is combined within one single policy – in this instance you only receive one single payment either when you die or when you are diagnosed with a life threatening critical illness as specified in the policy – basically whichever happens first.
For an additional cost critical illness insurance can usually be added to your existing life insurance policy.
Who Should Have Critical Illness Insurance?
Arguably critical illness insurance is important for everyone as life threatening conditions can strike at any age and the lump sum payment that you receive from a critical illness pay-out will cover not only your medical costs but it will also cover the wider financial needs of your family.
However one important point to note is that critical illness insurance does not pay-out if you are unable to work due to an illness such as stress or back pains – in such instances an “Income Protection Policy” would be wiser.
What Does Critical Illness Insurance Cover?
Not all policies cover every single critical illness, but guidelines from the Financial Services Authority state that the following critical illnesses must be covered as a bare minimum;
- Cancer – but only if it is advanced in nature and not every type of cancer is covered.
- Severe heart attack.
- A stroke which results in ongoing problems.
The reality is that most trusted life insurance companies cover anything in the region of 50 different types of critical illness from Bacterial Meningitis to permanent blindness and loss of limbs.
What is NOT Covered By Critical Illness Insurance?
For a condition to be covered by your critical illness insurance it MUST be included in your policy and you must meet specific criteria for the illness in question.
It is also important to note that if you are diagnosed with a medical condition after a certain age you may not be covered. For example many life insurance companies will not offer cover for Alzheimer’s if it is diagnosed after the age of 60.
Most policies will not pay-out against any claims that are made as a result of excessive alcohol consumption, use of illegal drugs or that are the result of extreme / dangerous sports.
When Will a Critical Illness Policy Pay Out
When you are diagnosed with your illness you will not receive a pay-out immediately. Most policies pay-out after what is known as a “survival period” which usually lasts 14 – 28 days. Essentially this means that if you die before the end of this survival period you receive nothing.