Welcome to part 2 of our 3-part series on essential insurances for the year. In Part 1, we discussed life insurance. Now we continue the series by examining critical illness cover. Let’s dive in!
What is Critical Illness Insurance?
Critical illness insurance provides financial protection in case you are diagnosed with certain serious medical conditions. Unlike life insurance that pays out when the policyholder dies, critical illness cover pays while you are still alive after receiving a qualifying diagnosis.
Policies typically pay out lump sums if diagnosed with major illnesses defined in the contract. This type of insurance aims to alleviate the financial burden during an already challenging period dealing with a severe illness.
Some policies also cover additional services like access to second medical opinions, therapy allowances, and assistance modifying the home. While specifics of what constitutes a triggering critical illness event may vary between insurance companies, the fundamental purpose remains providing financial stability when a policy holder is seriously ill.
What’s Covered Under Critical Illness Insurance?
Critical illness insurance pays out if you get diagnosed with specific severe illnesses during the policy term. These typically include:
- Cancer
- Heart attack
- Stroke
- Major organ failure needing transplant
- Multiple sclerosis
- Alzheimer’s disease
- Severe burns
Why Critical Illness Cover is Vital
A critical illness can hit at any time with exorbitant treatment costs plus loss of income during recovery. According to FT Adviser, Scottish Widows paid out 98% of protection claims it received in 2022. That amounted to a sum of £199m at an average critical illness claim of £55,546. We estimate that UK wide average critical illness claims was in the region of £85,000 in 2023. This cash injection would be immensely valuable. It can help to:
- Fund private healthcare/treatments
- Finance recuperation costs
- Replace income when unable to work
- Pay everyday bills and expenses
- Adapt home/lifestyle needs
Without critical illness insurance, families often exhaust life savings or go into debt managing these massive added costs at already stressful times.
In 2023, one of our clients received a critical illness payout of 133k. She and her husband realised their longstanding financial dream of paying off their mortgage.
How Much Does Cover Cost?
Like life insurance, premiums vary based on age, health, lifestyle and other intrinsics. A healthy 25 year old could pay £15 monthly for £100k of coverage, while a 60 year old may pay upwards of £100. Cover can last for set terms like 10 or 20 years or extend until age 65 or 70 in some policies. Payout amounts also impact pricing – more cover means higher premiums. Brokers assess how these variables affect quotes for your unique situation.
Making Successful Claims
Making a successful claim requires submitting medical evidence, like doctor’s reports, proving a policyholder’s diagnosis. Pre-existing conditions are generally not covered unless a set period has passed since taking out the policy. All things remaining equal, we’ll see average pay outs within 10 working days once approved!
Financial Security for Modern Times
Rather grimly, critical illnesses affect ever greater numbers, even younger folks, in our modern age. Alas! But the silver lining is that insurance coverage today fits 21st century lifestyles.
For example, many policies now include enhanced paternity, maternity and adoption leave – paying extra when serious illness strikes new parents. Top brokers also offer income protection advice if dealing with critical illness affects your employment status. We’ll cover more on this in the next article.
To sum up, critical illness insurance protects one of the most important things – our health.
Let’s have a no obligation chat to explore what’s possible. Contact us today.
Note – The information contained within was correct at the time of publication (January 2024) but is subject to change.