Do I need critical illness cover?

People often opt for a life insurance policy aware that in the event of their premature death, their family’s livelihood will be protected. It is also important to ask yourself if your family could manage financially if you became seriously ill and unable to work, in which case critical illness cover could offer an economic lifeline.

What is critical illness cover?

Essentially, critical illness cover is an insurance policy against becoming seriously ill. In the event you are diagnosed with one of a number of serious illnesses, such as a stroke, cancer or Parkinson’s disease (the number of critical illnesses covered by a policy varies between insurers), within the term of the policy, a tax-free lump sum would be paid out. You can spend the money in any way you choose, such as paying off some of your mortgage, replacing lost earnings if you are unable to work or covering medical expenses.

The length of the policy and the size of the lump sum payment are chosen when you purchase critical illness cover. Importantly, a policy typically pays out on diagnosis of a serious illness as opposed to a terminal illness; in other words, an illness need not be life-limiting.

Am I likely to develop a critical illness?

Nobody likes to buy insurance that is unnecessary, although equally no-one wishes to have to claim on any type of policy they have purchased! However, when considering whether critical illness cover is necessary, it is worth bearing in mind these statistics:

  • Approximately 1 in 5 men and 1 in 6 women are diagnosed with a critical illness before retirement 
  • Around 110,000 people in the UK suffer a stroke each year, half of whom will become dependent to carry out basic daily tasks in future
  • One half of adult cancer patients are expected to survive for at least ten years

How can critical illness cover benefit me?

Should you need to make a claim, critical illness cover can provide important benefits that will help to make the lives of you and your family easier:

Financial assistance at a crucial time

Just when you find yourself unable to earn a living or facing unexpected costs for medical expenses or adaptations to your home, your policy will provide an immediate lump sum payment. As it is tax-free, you won’t be compelled to hand over a portion and can therefore maximise it to support yourself and your family. 

You decide how to spend the money

Critical illness can land you with a variety of costs, especially if you are disabled by your condition. and it’s not always easy to predict what these will be. As well as loss of earnings and medical expenses, you may need to pay for childcare or home cleaning if you suddenly lose your mobility or face extended stays in hospital. Once recuperating, you might benefit from a holiday in warmer climes. It’s up to you how to spend the money.

Your family’s long term finances are protected

Instead of using your hard-earned savings to cover the unexpected costs associated with critical illness, the lump sum paid out under a policy means that you might be able to leave your assets intact. As critical illness isn’t always terminal, you will almost certainly wish to retain your home and your savings for as long as possible.

Even if you already have a healthcare plan in force, such as through your workplace, critical illness cover can offer the peace of mind and promise of a lump sum payment in the event that you become seriously ill. It is also possible to combine the benefits of an occupational healthcare plan and critical illness cover to ensure that your financial needs are looked after, just when you need the help.