Editorial Team
AUTHOR Editorial Team| CREATED 16 Sep 2014
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Critical illness cover: the critical facts

How would you and your family cope financially if you couldn’t work due to poor health? Here’s our essential guide to the importance of critical illness cover, and whether it could be right for you. 

No one likes to think the unthinkable. But statistics show we are four times more likely to suffer a serious illness than die before the age of 65. Critical illness cover can offer a financial lifeline if you develop a serious medical condition. It pays out a tax-free lump sum if the policyholder is diagnosed with a life-threatening illness specified by their plan.

While most of us tend to worry about the most common serious illnesses such as heart attack, cancer and multiple sclerosis, critical illness cover protects you against a much wider range of conditions. How wide varies from policy to policy.

The Association of British Insurers’ code on critical illness requires insurers to cover 23 different conditions, although some providers’ policies cover more than double this number. Some may also cover a policyholder who becomes permanently disabled as a result of injury or illness, either as standard or for an additional premium.

Why is critical illness cover so important?

Critical illness insurance can make sure that any large debts, such as your mortgage payments, are covered if you can’t work due to illness. It can also give you a lump sum to live off while you are unwell.

The potential for a lump-sum payout is especially important if you’re the family breadwinner. But even if you’re not, it may still be worth considering critical illness insurance with this feature. It can help you to meet your living expenses if you have to stop work due to ill health, and to cover the cost of childcare if you suddenly find yourself unable to take on that responsibility.

What are my choices?

You can choose a policy that either covers you for your whole life or for a fixed number of years. Cover is usually available for adults up to their mid-60s – it’s primarily cover for people who are working.

Remember that critical illness cover can often be added to a life insurance policy, so that it pays out either on diagnosis of serious illness or on death, whichever comes first. Combining cover can mean that premiums are cheaper than if you were to take out two separate policies.

The quality of the cover is as important as the price. Many people choose life assurance products on price alone, but you should look carefully at what both life and critical illness policies cover.

What do I do next?

If you have a financial adviser, they can tell you about the options available and which might be right for you, based on all your individual circumstances. They can also help you determine an appropriate level of cover, should you decide to go ahead and take out a policy.

Editorial Team

Old Mutual Wealth Expert in Finance, Protection, Investments, Pensions