Critical Illness Explained

Critical Illness cover is available as a standalone plan or built into a life insurance contract as an additional benefit.

There are millions of people suffering from a wide range of conditions that are covered under a critical illness plan. Neither is it too hard to think of a family member, a friend, a work colleague or even an acquaintance who is suffering or has suffered from a serious illness. With this in mind it is surprising that many of us place greater importance on insuring our cars, homes and contents than our health and physical well being.

The chances of surviving a critical illness are now much greater thanks to advances in medical science and surgical technology, such as heart and kidney transplants, chemotherapy and other cancer treatments. This has meant that a number of people who would otherwise have died now live longer and therefore need financial support to enable them to maintain their current standard of living.

Critical illness cover is not an alternative to life assurance. It is designed to meet a distinctly separate need. It provides a lump sum to assist you to overcome the physical, emotional and financial traumas that would accompany the diagnosis of serious disease. The funds provided by the critical illness insurance may actually aid your recovery by providing financial peace of mind.

Critical Illness insurance involves similar procedures to Life assurance in that, for example, completion of a proposal form will be necessary, giving full medical details and family medical history. Underwriters assess the risk and accept, rate or decline as appropriate. Because of the much higher risk to life offices, premiums are substantially higher than those for basic life cover.

In addition to the basic sum assured policy for critical illness, there are a number of options available on the market and premiums are levied depending on the product chosen.

Premiums can be guaranteed or reviewable. A guaranteed policy provides a fixed benefit for a fixed premium and term. A reviewable policy can be altered so that the monthly premiums change to reflect the claims experience of the insurance company. Therefore premiums could increase in the future due to bad claims experience.

It is possible to have a policy which pays out the sum assured on the event of a critical illness and have the life cover remaining, or the sum assured is paid out as pre-payment of death cover on diagnosis of a critical illness.

Flexible Sum Assured:

The sum assured is split according to the needs of the policy holder so that, for example 60% of the benefit is paid out for a critical illness claim leaving the other 40% in place as a death benefit.

Long Term Care Rider:

This option has a long term care element added to the critical illness plans (where it can be continued beyond retirement age) by switching the definition from an occupational one to one based on activities of daily living at retirement.