Unless you are printing money in your spare room or are lucky enough to have a mysterious benefactor depositing large amounts in your bank account, then yes, I would say that Critical Illness cover is most definitely worth having.
If you were to become seriously ill and couldn’t work, how would you pay the bills and support yourself?
And what about if you have a family? – Some support if you suddenly couldn’t work because of a critical illness would certainly take a load off your mind, wouldn’t it?
Especially if you are the main breadwinner.
Mortgage, rent, household bills, food shopping etc, all still have to be paid whether you’re receiving a paycheck or not, so taking out Critical Illness Cover is a good way of ensuring that those things are still covered in the event that you become too ill to work.
And the best bit is, it doesn’t have to be horribly expensive either.
What Is Critical Illness Cover?
Critical Illness Cover pays out a tax-free lump sum if you are diagnosed with an illness or medical condition that means you are no longer able to work, and maybe are unlikely to return to employment.
(It’s not to be confused with Income Protection that will pay you monthly if you can’t work due to illness or injury – up until the point you can return to work.)
The money you receive if you make a claim on your Critical Illness policy is yours to spend how you wish.
But before you get too excited and start planning where you’d jet off to, it’s normally used to clear debts or pay off a mortgage, or make any adaptations needed to your home due to your illness or injury.
How Does Critical Illness Cover Work?
If you take out Critical Illness Cover and then become ill with one of the conditions listed within the policy, you will receive a payout from the insurance company.
Let’s say, for example, that you take out a policy for £100,000 over a 25 year term, and during that time you are diagnosed with a type of cancer listed within your policy.
Your insurance company would pay out the lump sum, and then typically your policy ends.
Most insurers include children’s Critical Illness Cover within your policy, at no extra cost, although the payout is a lot less; typically between £10,000 and £25,000.
This can be a beneficial extra in the unfortunate event that one of your children were to become very ill, in that it can support any time you may have to have off work as a result.
Does A Critical Illness Policy Only Pay Out Once?
Most policies do, yes, but some policies will make a smaller payment if you are diagnosed with a less severe illness.
After that your policy would continue, allowing you to make another claim in the future if you were diagnosed with a more serious critical condition or illness.
What Conditions Does Critical Illness Cover…Cover?
The list varies from provider to provider, with a lot of insurance companies now including more than 60 different conditions.
As with all insurance policies it’s really important to read the small print carefully to make sure you understand exactly what protection you have.
Here is an example of the conditions covered under a ‘typical’ Critical Illness policy – the true list will vary from provider to provider.
| Aorta graft surgery Aplastic Anemia Bacterial Meningitis Benign Brain Tumour Blindness Traumatic Brain Injury Cancer (not advanced) Cardiac Arrest Cardiomyopathy Coma CJD Deafness Dementia and Alzheimer’s Encephalitis Heart Attack Heart Valve Replacement/Repair | Kidney Failure Liver Failure Loss of Hand or Foot Loss of Speech Major Organ Transplant Motor Neurone Disease Multiple Sclerosis Open Heart Surgery Parkinson’s Primary Pulmonary Hypertension Respiratory Failure Spinal Stroke Stroke Systemic Lupus Erythematosus Third Degree Burns Total and Permanent Disability of specified severity |
It’s also important to know that even if the illness you are diagnosed with is on the list, whether or not you get a payout could depend on how severe or permanent your condition is.
For example, some forms of cancer aren’t included because they are easily treatable, and some companies will only pay out once a cancer has reached a particular stage.
Grim, but something you might need to know.
What Isn’t Covered By Critical Illness Insurance?
Again, this will vary with insurers, but generally you won’t be covered for any pre-existing conditions – that is health problems you knew you had before you took out the insurance.
Also, Critical Illness pays out if you are diagnosed with an illness and are still alive; diagnosed with a heart condition for example – however if you were to suddenly drop dead of a heart attack it is Life Insurance that would potentially pay out – not Critical Illness Cover
How Much Does Critical Illness Cover Cost?
The cost of Critical Illness Cover, much like with Life Insurance, will depend largely on your health and age.
Your monthly premiums will increase as you get older and unhealthier because the likelihood of you needing to make a claim increases.
Other factors that will affect the cost of your monthly premiums include:
- The amount of cover you take out
- The length of time you take it out for
- Your family medical history
Your job – some occupations are much higher risk and therefore you might be more likely to make a claim. This will be reflected in the cost.
Here are some example costs based on being a non-smoker with no medical conditions and no adverse family medical history, quoting for £100,000 of cover over 20 years*
| Level cover | Decreasing cover | Income plan | |
| 30 years old | £24.78 per month | £15.80 per month | £12.51 per month |
| 40 years old | £51.17 per month | £29.72 per month | £21.42 per month |
| 50 years old | £109.13 per month | £68.11 per month | £46.14 per month |
| 60 years old | £296.66 per month | £205.24 per month | £129.21 per month |
Do I Need It Though?
Another monthly bill going out in the form of Critical Illness Cover premiums might not be that appealing, but if you couldn’t work because of a long-term illness or disability, what would be the alternative? If you’re even eligible to claim an employment or support allowance you’re only looking at between £70 to just over £100 per week depending on your circumstances – not going to cover many of your outgoings is it?….and I assume you and the family would all like to continue eating?
I would definitely recommend taking out Critical Illness Cover if:
- You don’t have a benefits package as an employee that will cover you taking a long time off work due to sickness
- You haven’t got enough in savings to support you and your family if you were to become seriously ill or disabled.
- You haven’t recently won millions on the Lotto
Do Insurers Always Pay Out?
It’s easy to find out the percentage of claims paid out by your chosen insurer, as that information has to be made available to the public…but according to the Association of British Insurers somewhere in the region of 97.6% of all Critical Illness Claims are paid out, with an average payout of £81,000.
What About The Ones That Don’t?
The overwhelming majority of claims that don’t pay out are due to non-disclosure; that is applicants not giving accurate information when they apply for their policy – most importantly not disclosing all their relevant health information. It might seem tempting not to mention that exotic-sounding disease that runs in the family, afterall, it’s probably skipped a generation…why not save a few quid on your premiums? But if you then go on to become ill and unable to work due to coming down with said disease, and your family history comes to light, you’ll receive nothing. Non-disclosure can be an expensive mistake, whether intentional or not.
So to sum up, Critical Illness Cover: get it. Unless you’re minted, in which case thank you for reading my article from aboard your yacht.
If you’re not on a yacht, and you need help or advice on finding the right Critical Illness Cover for you, give More Than Money a call. We’d love to help!
