Let’s
face it, unless you have dependants, or your mortgage company
demands it, life assurance offers you - yes, YOU - no real
personal benefits other than piece of mind.
After all, most of us take out life assurance to provide for our
families if the worst does happen, or to cover a mortgage or other
substantial loans.
There are, though, plenty of medical conditions and illnesses
that, although not immediately fatal, have a serious impact on both
our lifestyles and, crucially, our ability to earn a living.
And that's where critical illness cover comes in.
How it works
Heart disease, strokes and cancer are the most common causes of
death in the UK*, but advances in medical science mean that more
people survive these serious illnesses every year. While Critical
Illness cover will not pay out on most early stage forms of cancer
and 'mild' heart attacks, the financial cushion provided by the
proceeds of a policy can be vital during a period of recovery from
the types of cancer and heart attack that are covered.
*
Source - British Heart Foundation June 2004.
Conditions that were once almost always fatal can now be treated
- if not actually cured - and the victim might well live on for
decades afterwards.
This is one reason more people are looking at critical illness
cover, either alongside or as an alternative to a life assurance
policy.
Critical illness cover pays out a lump sum if you are diagnosed as having one of a number of illnesses,
including some forms of cancer, strokes and heart disease. And the policy will pay
out even if you subsequently make a full recovery.
Statistics show how common critical illnesses are. One in three
people will suffer from cancer at some point in their lives, with a
third of those succumbing to the disease before the age of 65*.
*Source - Cancer Research UK 12/01/2005
The most common forms of cancer that are excluded
from most Critical Illness policies include most 'early stage'
cancers that can be easily treated, and non malignant melanoma skin
cancers that may be 'in situ' and not spreading.
There are, however, a number of other conditions
that are covered by Critical Illness plans, and cancer is only one
of them. Clearly, if you do fall seriously ill with any of the named
conditions (including those cancers that are covered), there is a
lot to be said for a financial cushion.
A policy could help someone with a critical illness pay off the
mortgage or other loans, compensate for a loss of income from work,
or pay for children to finish their education.
Alternatively, it could pay for modifications to the house and
car to make them suitable for someone with a disability.
The point about the cash resulting from a CIC policy is that you
can use it for whatever you wish. This is unlike, for instance,
mortgage payment protection insurance (MPP), where the policy is
sometimes paid direct to your mortgage lender.
CIC with life assurance
Many critical illness policies are sold as
an 'add-on' to life assurance policies. In practice,
this means a policyholder receives his or her life assurance payment
once a critical illness is diagnosed, rather than on death.
If the policyholder makes a full recovery, the payment is still
theirs to keep. If they subsequently die, however, there is no
additional life assurance payment. If they die suddenly - or within the
'survival period' - the life policy pays out in the normal way.
Standalone policies
A standalone critical illness policy will cover the same
range of sicknesses as the critical illness part of a combined
policy.
The difference is that someone who suffers a critical illness can
make a claim, but any life assurance is unaffected. Should they
eventually succumb to the illness, their family will receive a
further lump sum.
The disadvantage is that running two policies side by side is
more expensive. Also, there will be no payment from the critical illness
policy if the holder dies suddenly, for example, in an accident.
CIC - an overview
Beyond these basics, when it comes to choosing critical illness
cover, it’s important to compare like with like. There are industry
standards for critical illness policies, but these cover the basics.
Insurance companies are free to go beyond the standard, and while
this increases choice, it can make matters confusing for consumers.
What it covers
The basic, or 'core', conditions covered by critical illness
policies are:
Some forms of heart attack,
Some forms of cancer,
strokes,
multiple sclerosis,
kidney failure,
major organ transplants
coronary artery by-pass surgery
These are covered whether or not the patient makes a full
recovery. With some conditions, especially cancers that are
diagnosed early enough, recovery prospects are now far better than
even 10 years ago. In addition, the Association of British Insurers
sets standard definitions for a further 13 conditions, as well as
for permanent disability. Full details are available from the ABI's
web site:
www.abi.org.uk. Some insurers offer additional benefits
for conditions including blindness and deafness, loss of speech,
loss of limbs, or falling victim to Alzheimer's or pre-senile
dementia before the age of 65.
Your About Mortgages adviser will be able to take
you through the conditions covered by various companies
Once you have decided to protect yourself against
Critical Illness, your next step is working out how much cover you
need.
Please remember that the amount of life and critical illness cover you
need should be reviewed regularly and as your financial circumstances
change. If you are unsure of the amount of cover or type of policy
you require you should
complete an
advice request to arrange a no obligation review of your needs.
About Mortgages Ltd
Registered in England & Wales No 5170864.
The guidance and/or advice contained within this website is subject
to the UK regulatory regime, and is therefore targeted at consumers
based in the UK.
