1. What it covers
Critical illness cover is a type of health insurance that pays out a lump sum if you are diagnosed with any one of a number of pre-agreed illnesses, such as heart attack, cancer or stroke, during the term of the policy. It can help pay the mortgage or ongoing household expenses. Most policies usually come with 35 or more conditions that are covered. It's crucial you get the right cover.
2. Buy it with life insurance
If you die a short period of time after suffering a critical illness (usually 21 days but it differs slightly between insurance firms) the insurer deems that to be a life insurance claim and will not pay out on critical illness cover. The good news is that life insurance policies can be added to a critical illness policy at no extra cost, so it is absolutely essential to do this so that every eventuality is covered.
Also, make sure the life insurance policy is 'written into trust' which stops any payment being held up by the tax man during probate. Most financial advisers should write the trust for free. A solicitor can also provide this simple document but will probably charge.
3. Consider serious illness cover
In recent years a new form of critical illness insurance has been developed that pays out various percentages of your total amount of cover depending on the severity. This means that some less severe conditions, such as early stage cancer, that might be declined under a traditional policy would receive a partial pay out, while other conditions that might trigger a full pay out under standard critical illness cover may pay out slightly less than the full amount. It does offer very comprehensive protection and will pay the full amount if you are very ill, but make sure you are aware of the conditions of claim first.
4. Use an adviser
A critical Illness policy is complicated and the application process can be even more challenging. Asking an expert to guide you and recommend the best quality policy is essential for anyone who does not understand these products completely. You need to know what illnesses are covered, what the definitions for paying a claim will be, which insurers will give you the best price bearing in mind their very different approaches to underwriting. Only an adviser can do this for you and perhaps most importantly, they will help you claim if you do become ill.
5. Check the extra benefits
Some insurances and advisers sell their policies with extra benefits free of charge. There include access to counselling services, vocational training to help you return to work after illness or access to a selection of specialist doctors. For some, these extras can be as valuable as the money they receive and helps them to cope with the worry that ill health brings.
6. Be careful when switching a policy
Although critical illness policies tend to cover more conditions these days and, in some cases, could be less expensive (for example, if you have given up smoking) the definitions of what level of severity would trigger a claim has become more stringent as medical technology and treatment has advanced. Switching a policy because of price may not be in your best interests.
And don’t forget that if you do switch policies, don’t cancel the old one until the new policy is in place just in case a problem arises during the application. If you cancel it, you may not be able to reinstate the old policy again.
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