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Should I get critical illness cover?

Happy family at the beachLife insurance will cover you in the event of your death but you can also insure against becoming critically ill.

You're actually four times more likely to suffer a serious illness than die before the age of 65. A serious illness can turn your life upside down and throw your finances into disarray. This is why, when taking out life insurance, many people also opt to take out critical illness cover.

Critical illness cover helps out by paying a tax-free lump sum if you're diagnosed with a defined critical illness. A payout could be used to deal with your major financial commitments, particularly your mortgage, so you don’t have to add debt to your worries. It could also be used to pay private medical bills or make necessary changes to your house.

When you take out critical illness cover you will choose the policy term, for example 25 years. If you fall ill with a defined critical illness during the policy term then you’ll be able to make a claim. You are covered throughout the term, provided you keep paying your life premiums, but once the policy term ends all protection stops and there is no cash-in value.

Doubling up on life cover

Many people buy a combined life and critical illness policy, and it makes sense to do so. Firstly, you have double protection, against both death and illness. Secondly, it tends to be cheaper than taking out both plans separately.

If you take out a combined life and critical illness policy, you can only claim once. So, for example, if you get a cash payout after being diagnosed with cancer, the policy is effectively finished. There is no life insurance payout if you die at a later date.

Adding critical illness cover to your life insurance will increase the monthly premium quoted. The reason it’s more expensive is a simple matter of risk. There’s a higher likelihood of developing a condition which can be claimed on with a critical illness policy.

If you're single and don’t have any dependents, you probably don’t need life insurance. However, if there's nobody to look after you financially in the event of an illness, it may be even more important to have critical illness cover.

How critical illness cover works

The number and type of illnesses covered vary by provider. You should always check your policy details to see what illnesses are covered under your critical illness plan. Commonly illnesses covered include: some types of cancer, heart attack and stroke. They may also include brain tumours, blindness, chronic lung disease, dementia, kidney failure, loss of limbs, motor neurone disease, multiple sclerosis and Parkinson’s disease.

Traditional critical illness plans pay out the full sum assured regardless of how serious your illness actually is. But some life insurance policies offer severity-based cover, where the amount of money you get depends on how bad your illness is. So if you suffer an early-stage cancer, you will get a smaller payout. In this case, both your critical illness cover and life cover would continue for the term of the policy, which means you might be able to claim more than once.

How much cover do I need?

When deciding upon the level of cover you need against a serious illness, try to gauge the extent of your loss of earnings if you were unable to work due to illness. You should also think about what financial commitments you would still have, such as monthly mortgage payments.

With Confused.com you can take out a combined life insurance and critical illness policy. A combined policy will pay out 100% of your chosen amount. For example, if you choose £100,000 worth of cover for your combined policy then £100,000 will be paid out if you claim under your critical illness plan.

Waiver of premiums insurance

An additional option you may wish to consider when taking out life insurance and critical illness cover is waiver of premiums insurance. This will extend additional protection to your policy by ensuring that premiums continue to be paid if you're unable to continue your normal employment because of illness or injury.

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