Critical Illness Cover
Critical illness cover is a specific insurance policy designed to issue a tax-free payout in the event of a serious illness or injury. It is a separate policy to life insurance, but some insurers do include critical illness as part of their life cover.
You can never predict what will happen in life and not being in the position to pay for your outgoings and expenditure is a thought that doesn’t sit comfortably with most people. With critical illness cover, you can ensure your mortgage payments and essential outgoings are covered if you fall ill or injured with a tax-free payout.
What is classed as a Critical Illness?
As is the case with most types of personal insurance, different insurers have different requirements, so what one considers a critical illness, another may not. However, there is a general list of the types of illness and injury that are covered by critical illness cover, they are as follows:
- Heart attacks
- Non-terminal cancer (not all types of cancer are covered)
- A serious incident at work that has caused a physical disability
Since every insurer classifies Critical Illness differently, it is recommended you take advice before taking out a policy to understand what you are covered for, and avoid surprises down the line. Furthermore, with Critical Illness Insurance you get what you pay for, some policies cost more but cover you for a wider range of conditions, your adviser at Perfect Life can talk you through your options.
Who Can Take Out Critical Illness Cover?
Again, this can vary from insurer to insurer, but standard requirements are that you must be a UK resident over the age of 18 and you must have a UK bank account that the monthly premiums can be paid from. Most insurers also require additional information that will determine how much you pay for critical illness cover. They will typically ask if you smoke or not, your age and whether you lead a healthy lifestyle in general. The results of which can determine the cost of your cover, so in theory, the healthier you are the less your cover is likely to cost.
How Much Critical Illness Insurance Do I Need?
This depends on what you are looking to cover, and you adviser at Perfect Life can help you come to a figure. In some cases you may want to cover the value of your mortgage, meaning you are debt free should you fall seriously ill. Maybe you would want to be able to take some time off work should you ever get sick, so one or two year’s salary might be the correct figure. Remember Critical Illness Insurance becomes much more expensive as you get older, so it’s best to get covered sooner rather than later.
Why Do You Need Critical Illness Cover?
The idea of becoming too ill or injured to work and provide for your family is not a nice thought, but it does happen and the illness and injury can even be caused at work – in 2016/17, 31.2 million working days were lost due to work-related ill health and non-fatal workplace injuries (hse.gov.uk). Critical illness cover is particularly important if your family rely on you financially. The payout can be used for anything you deem necessary, whether that’s a mortgage payment or childcare, therefore, it means your family wouldn’t have to worry about finances and instead they can focus on your recovery.
General Terms and Conditions Of Critical Illness Cover
- Critical illness cover only pays out once and then the policy is terminated, so you are no longer covered for anything else after a payout.
- Critical illness cover does not pay out if you die, whereas general life insurance pays out if you die during the policy.
- Critical illness cover is different to life insurance, but some providers do provide it as a package, some don’t even sell critical illness cover separately, so always check when you approach a provider.
- The premiums should be tax-free and would need to be included on your P11D form.