Life & Critical Illness Insurance
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Critical Illness Insurance Guide
Critical illness insurance provides financial protection against the risk of contracting a serious illness or medical condition as specified by the insurer.
By paying a relatively small premium, you are paying to ensure that if you become seriously ill and cannot work, you will receive a payout which can be used to fund medical treatment or other expenses.
In calculating the critical illness insurance premium that you need to pay, an insurer company will use an actuarial approach and claims experience to determine the likelihood of the risk event happening and cost this risk accordingly.
Different Types of Illness Insurance
There are different types of life insurance cover available – see the list provided below.
Type of Illness Insurance |
Illness Insurance Features |
|
Critical Illness Insurance |
Provides financial peace of mind that a lump sum will be paid out to the policyholder in the event of diagnosis of a specified critical illness condition. Critical illness insurance can often be taken out in a combined policy with life insurance, saving costs. |
|
Key Person Critical Illness Insurance |
Key person insurance provides financial cover to businesses if a staff member is unable to work due to severe illness or disability. The loss of such an individual can have significant financial consequences on a business. The cover would also typically cover the key persons’ income and benefits, which the company would still be liable to cover. |
|
Payment Protection Insurance |
Protects in the event of accident, sickness or unemployment (ASU) or death to the policyholder and is usually taken out in conjunction with a credit agreement when obtaining a loan or credit card. PPI, as it is often called, normally covers debt repayments for 12 months, after which time the onus falls back on the policyholder to cover the repayments. Recently, this type of cover has been criticised, with banks being ordered to repay missold PPI back to customers. |
|
Terminal Illness Insurance |
This cover is often combined with life insurance and critical illness insurance policies. It provides financial protection in the event of diagnosis of a terminal illness where you are not expected to live beyond a set period, e.g. 12 months. |
Guide to buying critical illness insurance
As with many things in life, the more time you put into something, the more you will get out and with buying critical illness insurance, spending some time understanding what to look out for can save you both time and money in the long run and should ensure that you end up with the right cover. Things to consider:
- Check what existing critical illness insurance you have – Depending on the cover required, you may find that you have critical illness insurance taken out by your employer as part of your benefits package. Once you have done this, check what you are covered for and what you are not. People don’t often know what exclusions apply until a claim is made.
- Using a Comparison website – Online comparison websites provide a valuable and easy way of getting insurance quotes. However, for critical illness insurance, in our view, it makes sense to talk to a specialist insurance broker to ensure you get the right cover. This is crucial if you have a pre-existing medical condition.
- Using a Life Insurance broker – If you are unsure what cover you need or want somebody to help you through the process, many life insurance brokers will be happy to help. A good life insurance broker will not help you in buying critical illness insurance but also provide support if you need to make a claim. If you intend to use a broker, check their FCA registration on the FCA website.
- Providing correct information – In assessing the insurance risk, an insurance company will rely on the information you give as being accurate. Information provided will determine whether insurance is provided and the cost of premiums. Therefore, any information you provide is correct, e.g. for critical illness insurance, factors such as previous medical history can have a material impact on the premium you are required to pay. Non-disclosure of such information at the time of application can result in a non-payout in the event of a claim. If you are using an insurance broker, this is where valuable advice can be provided.
- Cheapest is not always best – With critical illness insurance policies, you generally get what you pay for, so before you sign up, e.g. reviewable life insurance policies where the premium is subject to review after say 5 years, will be cheaper than guaranteed life insurance policies where the premium will not change through the term. Also, different life insurance companies will cover other conditions or have separate policies. Hence, comparing policies on a like-for-like basis is not easy, so price should not be the only factor considered.
- Changing your mind – You have the right to change your mind within a set period, typically 14 days from purchasing the critical illness insurance policy and have your premium returned.
- Type of Policy – with critical illness cover, survival for a certain period, typically 14 days, from diagnosis is usually required. The policy can be arranged as a stand-alone policy or as an add-on to a life policy, e.g. level term assurance, mortgage protection or a whole life insurance policy.
Advantages:
-
Critical illness can strike at any time, and the policy is designed to pay out on diagnosis of a specified condition which will provide financial peace of mind during a personal crisis.
-
The proceeds from the policy are tax-free.
-
It is possible to protect yourself against a wide range of conditions and illnesses, and so it is essential to choose the right policy for you
Disadvantages:
-
Premiums are more expensive compared to conventional life cover.
-
Comparing policies from different companies is difficult because terms and conditions can vary widely.
-
Medical evidence will be required, possibly a medical examination for those in poor health or those requiring significant levels of cover.
If you are unsure about which type of life or critical illness insurance is right for you, complete our critical illness insurance quotes enquiry form to speak to an expert.
Top Tips When Buying Critical Illness Insurance
Things to consider:
- Check what existing critical illness insurance you have – Depending on the cover required you may find that you have critical illness insurance taken out by your employer as part of your benefits package. Once you have done this check what you are covered for and what you are not. People don’t often know what exclusions apply until a claim is made.
- Using a Comparison website – Online comparison websites provide a useful and easy way of getting insurance quotes. However for critical illness insurance in our view it makes sense to talk to a specialist insurance broker to ensure you get the right cover. This is more crucial if you have pre existing medical condition.
- Using a Life Insurance broker – If you are not sure what cover you need or want somebody to help you through the process there are many life insurance brokers who will be happy to help. A good life insurance broker will not help you in buying critical illness insurance but also provide support in the event that you need to make a claim. We use Torquil Clark life insurance brokers who are part of the Skipton Group to help people find the critical illness insurance quotes. If you intend to use a broker you should check their FCA registration on the FCA website.
- Providing correct information – In assessing the insurance risk an insurance company will rely on the information that you give as being accurate. Information provided will determine whether insurance is provided and the cost of premiums. It is therefore important that any information you provide is correct e.g. for critical illness insurance factors such as previous medical history can have a material impact on the premium you are required to pay. Non disclosure of such information at the time of application can result in a non payout in the event of a claim. If you are using an insurance broker this is where valuable advice can be provided.
- Cheapest is not always best – With critical illness insurance policies you generally get what you pay for so before you sign up e.g. reviewable life insurance policies where the premium is subject to a review after say 5 years will be cheaper than guaranteed life insurance policies where the premium will not change through the term. Also different life insurance companies will cover different conditions or may have different policies so comparing policies on a like for like basis is not easy and so price should not be the only factor considered.
- Changing your mind – You have the right to change your mind within a set period normally 14 days from purchase of the critical illness insurance policy and have your premium returned.
- Type of Policy – with critical illness cover, survival for a certain period, normally 14 days, from diagnosis is normally required. The policy can be arranged as a stand alone policy or as an add-on to a life policy e.g. level term assurance, mortgage protection or a whole life insurance policy.
Pros & Cons Of Critical Illness Cover
Advantages:
-
Critical illness can strike at any time and the policy is designed to pay out on diagnosis of a specified condition which will provides financial peace of mind in a time of personal crisis
-
The proceeds from the policy are tax free
-
It is possible to protect yourself against a wide range of conditions and illnesses, and so it is important to choose the right policy for you
Disadvantages:
-
Premiums are more expensive compared to conventional life cover.
-
Comparing polices from different companies is difficult because terms and conditions can vary widely.
-
Medical evidence will be required and possibly a medical examination for those in poor health or those requiring significant levels of cover
What Is Critical Illness Insurance?
By paying a relatively small premium you are paying to ensure that if you become seriously ill and cannot work you will recieve a payout which can be used to fund medical treatment or other expenses.
In calculating the critical illness insurance premium that you need to pay an insurer company will use an actuarial approach as well as claims experience to determine the likelihood of the risk event happening and cost this risk accordingly.
Guide to buying critical illness
- Check what existing critical illness insurance you have – Depending on the cover required you may find that you have critical illness insurance taken out by your employer as part of your benefits package. Once you have done this check what you are covered for and what you are not. People don’t often know what exclusions apply until a claim is made.
- Using a Comparison website – Online comparison websites provide a useful and easy way of getting insurance quotes. However for critical illness insurance in our view it makes sense to talk to a specialist insurance broker to ensure you get the right cover. This is more crucial if you have pre existing medical condition.
- Using a Life Insurance broker – If you are not sure what cover you need or want somebody to help you through the process there are many life insurance brokers who will be happy to help. A good life insurance broker will not help you in buying critical illness insurance but also provide support in the event that you need to make a claim. We use Torquil Clark life insurance brokers who are part of the Skipton Group to help people find the critical illness insurance quotes. If you intend to use a broker you should check their FCA registration on the FCA website.
- Providing correct information – In assessing the insurance risk an insurance company will rely on the information that you give as being accurate. Information provided will determine whether insurance is provided and the cost of premiums. It is therefore important that any information you provide is correct e.g. for critical illness insurance factors such as previous medical history can have a material impact on the premium you are required to pay. Non disclosure of such information at the time of application can result in a non payout in the event of a claim. If you are using an insurance broker this is where valuable advice can be provided.
- Cheapest is not always best – With critical illness insurance policies you generally get what you pay for so before you sign up e.g. reviewable life insurance policies where the premium is subject to a review after say 5 years will be cheaper than guaranteed life insurance policies where the premium will not change through the term. Also different life insurance companies will cover different conditions or may have different policies so comparing policies on a like for like basis is not easy and so price should not be the only factor considered.
- Changing your mind – You have the right to change your mind within a set period normally 14 days from purchase of the critical illness insurance policy and have your premium returned.
- Type of Policy – with critical illness cover, survival for a certain period, normally 14 days, from diagnosis is normally required. The policy can be arranged as a stand alone policy or as an add-on to a life policy e.g. level term assurance, mortgage protection or a whole life insurance policy.
What are the benefits and limitations of critical illness insurance?
Advantages:
-
Critical illness can strike at any time and the policy is designed to pay out on diagnosis of a specified condition which will provides financial peace of mind in a time of personal crisis
-
The proceeds from the policy are tax free
-
It is possible to protect yourself against a wide range of conditions and illnesses, and so it is important to choose the right policy for you
Disadvantages:
-
Premiums are more expensive compared to conventional life cover.
-
Comparing polices from different companies is difficult because terms and conditions can vary widely.
-
Medical evidence will be required and possibly a medical examination for those in poor health or those requiring significant levels of cover
If you are not sure about which type of life insurance or critical illness insurance is right for you complete our critical illness insurance quotes enquiry form to speak to an expert.