Is Critical Illness Insurance worth it?

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Is Critical Illness Insurance worth it?

Critical illness insurance is a type of insurance that pays out a tax-free lump sum if you or one of your loved ones is diagnosed with a serious illness. 

Being diagnosed with a serious illness can mean having to stop work, and is associated with incurring extra expenses. In these circumstances, an insurance payout could be crucial in helping you stay in the black. 

It’s often the case that standard benefits like statutory sick pay fail to cover all the costs which can be incurred following a serious diagnosis, making it prudent to consider critical insurance should the worst happen.

A diagnosis can come at any time

What are the benefits of critical illness insurance? 

Unlike life insurance, which pays out in the event of death, critical illness insurance will pay out after a severe diagnosis, meaning you and your family will benefit directly as a result of taking out the policy.

Should you become critically ill, critical illness insurance can pay out in the event of a wide range of diagnoses. These can range from a diagnosis of multiple sclerosis to heart attacks to cancer. 

If you’re unable to work after becoming critically ill, a tax-free payout will help to pay for housing costs, bills and any medical expenses which might be incurred. 

The statutory sick benefit is just £99.35 per week in the UK and is only paid out for a maximum period of 28 weeks. Many people who face illness and unemployment find the payments to be inadequate in meeting their needs. 

Taking out critical illness cover can give you peace of mind that there is a safety net in the event you or a loved one should come down with a serious illness, and help you through the difficulties involved if the worst should happen. Typically, a policyholder will have 30 days of taking out their coverage to cancel the policy with a full refund.

Do I need critical illness insurance?

According to the latest guidance by consumer comparison website Compare the Market, critical illness insurance can be a “Cost-effective way to protect you financially against illness and disability. But there are pros and cons.”

A serious illness diagnosis can come out of the blue, and affect people of all ages. Most people won’t have sufficient savings to see them through months or perhaps even years out of work while being critically ill.

When considering taking out critical illness insurance, consider your circumstances and the costs you’ll need to cover in the event you are unable to work due to a critical illness. 

State sickness benefits are unlikely to cover your costs in the event you lose work and incur extra expenses as a result of a critical illness. 

Be sure to look at what sickness benefits your employer has in place and consider the value of your savings.

Advice from The Times’s Money Mentor encourages prospective buyers of critical insurance to check what if anything their employer has in place: 

“Although you may be entitled to some state benefits if illness ever prevented you from working, they are unlikely to be enough for you to maintain your standard of living.

However, before you buy any cover, it is also worth checking what benefits you have at your company. Some employers offer generous benefits for employees who aren’t able to work.

You should also think about how long your savings would last if you couldn’t work. In addition to paying the mortgage, consider other costs you may incur as a result of being unwell. For example, if you need to pay for care in your own home.”

How Much Does Critical Illness Insurance Cost? 

The cost of critical illness insurance will vary between providers, and change based on the amount of coverage provided, and the policyholder’s medical information. 

Other important factors can include hazardous hobbies, occupation, health weight and medical history, age and smoking status. 

Critical illness policies can range from offering more basic protection to more comprehensive coverage, which can include support for loss of income and cover a wider range of illnesses. For this reason, be wary about choosing your policy solely based on price. 

Critical illness insurance is typically more expensive than life insurance, but costs can be mitigated by tailoring the policy to the needs to your personal needs.

What are the Downsides of Critical Illness Insurance? 

Not every illness will be covered by critical illness insurance. Be sure to read your policy closely before taking it out to be clear about what is and isn’t covered. 

Prices are typically higher than life insurance and will be affected by your own personal health, habits and family history.

Critical illness insurance doesn’t have a cash-in function, meaning if you survive the policy without being diagnosed with a serious illness there is no cash-back in whole or part.

What is the difference between critical illness insurance and life insurance? 

Critical illness insurance and life insurance are both financial products designed to protect in times of need, but they serve distinct purposes and offer different benefits.

Life insurance is primarily intended to provide financial support to beneficiaries in the event of the insured person’s death. When the policyholder passes away, the beneficiaries receive a lump sum payout, known as the death benefit. This money can be used to replace lost income, cover funeral expenses, pay off debts, or support the family’s financial needs. Life insurance policies come in various forms, including term life insurance, whole life insurance, and universal life insurance.

On the other hand, critical illness insurance offers coverage for specific medical conditions listed in the policy, such as heart attack, stroke, cancer, or organ failure. If the insured person is diagnosed with one of the covered illnesses and survives the waiting period specified in the policy (typically 30 days), they receive a lump sum payout. This money is intended to help cover medical expenses, ongoing treatment costs, mortgage payments, or any other financial obligations that may arise due to the illness. Unlike life insurance, critical illness insurance pays out while the insured person is still alive.

One key difference between the two types of insurance is the trigger for the payout. Life insurance pays out upon the death of the insured, whereas critical illness insurance pays out upon diagnosis of a covered illness while the insured is still alive. Additionally, critical illness insurance typically covers a specific set of illnesses, whereas life insurance provides broader coverage for any cause of death.

Both critical illness insurance and life insurance offer financial protection, but they serve different purposes. Life insurance provides a death benefit to beneficiaries upon the insured’s death, while critical illness insurance provides a lump sum payment to the insured upon diagnosis of a covered illness. Depending on your financial needs and priorities, you may choose to have one or both types of insurance coverage.

Do I need to Disclose my Medical History to Take Out Critical Illness Insurance? 

Insurers will need to see your and your family’s medical history before they will issue the coverage. 

It is vital to provide comprehensive and transparent information about your medical history, including
any history of particular illnesses in the family. Failing to fully disclose medical history could result in the insurer refusing to pay out if a claim is made.

Disclosure of a pre-existing condition may not necessarily be disqualifying but could result in the payment of higher premiums.

How Does Critical Insurance Work? 

After deciding how much you want the policy to pay out, the length of the policy, and the types of illnesses covered by it you’ll be asked to disclose your medical information. 

Flexibility in critical insurance packages can enable you to tailor the coverage to your specific needs, for example having the coverage come to an end when your mortgage is paid off or you reach pensionable age. 

After taking account of all the circumstances the insurer will then quote a monthly premium. If you find the terms agreeable and commence with the policy, you will be entitled to a one-off tax-free payment – or regular payments if loss of income protection is taken out – in the event you become critically ill. 

That payment can then be used as you see fit, without restriction. In some instances, a joint policy will only pay out once, be sure to check your policy to be across the details.

Is Critical Illness Insurance Value For Money? 

Although critical insurance premiums are typically more expensive than life insurance policies, the event of a tax-free pay-out will see the policyholder taking far more out than they put in. 

Tim Henning of the consumer advice group Money Supermarket says: “If you don’t have a savings pot, critical illness cover can be reassuring. If you fall seriously ill unexpectedly, the payout can be a source of income for you and your family.

Critical illness cover can give you peace of mind if you have children or other family members that rely on you financially.”

Insurers typically pay out over 90% of critical illness insurance claims made, with over £1.2 billion being paid out in the UK in 2021, data from the Association of British Insurers shows. 

In a recent article for consumer magazine Money to the Masses, it was said that while critical illness insurance can be more expensive than life insurance, there are several advantages which it said, would ultimately be worth it in the event you need to make a claim, saying ‘some cover is better than no cover.’

What Should I Know About Critical Illness Insurance? 

The price of a critical illness insurance policy will reflect the extent of the coverage being taken out, and you and your family’s medical history. 

As with every insurance policy, there are stipulations to consider. For example, a cancer diagnosis in and of itself may not see a pay-out where the cancer is considered to be in its early stages or where it is not yet considered life-threatening. 

In cases of stroke, payments might not be made unless neurological damage persists for a period, often around one month.

According to the latest guidance by the Citizens Advice Bureau, there are several factors you should consider when thinking about taking out critical illness insurance. These include the amount you will receive in the event you make a claim, which illnesses are covered by the policy, under what circumstances you would become eligible to claim and if existing medical conditions are covered by the policy.

Do I need critical illness insurance? 

Critical illness insurance can provide a one-off tax-free payment in the event you or a member of your family is diagnosed with a serious illness. 

The payment could prove crucial to avoiding financial difficulties, particularly if you would otherwise be expecting to rely on state sickness benefits which are often insufficient to make up for the loss of income or pay extra costs incurred as a result of illness. 

Critical illness insurance policies have the added advantage of flexibility, allowing you to tailor your policy to your personal needs. This can see premiums rise or fall in line with the coverage you want

Remember to be transparent when disclosing your medical history to the insurer and to take care to examine the details of your policy closely.

As life insurance continues to increase, more and more people are looking to pay the price of getting older.

Out-of-pocket expenses could land a person off sick from work with considerable difficulty – critical illness insurance aims to see you and your family through tough times.

Moreover, while monthly premiums are generally higher than life insurance premiums, they remain relatively modest, and in the event of the pay-out are likely to be paid back many times over. 

Ultimately critical illness insurance can provide peace of mind for you and your family that in the event the worst should happen, you can avert falling into financial difficulty.

Your health is your wealth, but can you truly put a price on peace of mind? Secure your future with Critical Illness Insurance. Don’t wait for uncertainty, connect with a deVere advisor today and ensure you’re covered, because you are worth it.


Mario Laghos​

Mario Laghos is a journalist. His work has appeared in the Critic magazine, the Daily Express, and the Daily Mail

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