Critical Illness guide

No-one likes to think about becoming seriously ill. We all prefer to believe nothing bad will ever happen to us. But the sad truth is that one in six women and one in five men will have a serious medical condition at some point in their lives.

Being off work with a long-term illness is as financially devastating as being made redundant. The last thing you need when you’re laid low is to be worrying about how to pay the bills. This is where critical illness insurance comes in.

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How does critical illness insurance work?

Critical illness insurance pays out a lump sum if you’re diagnosed with one of a series of serious medical conditions such as cancer, heart attack and stroke. It will also pay out if you are permanently disabled as a result of injury or illness.

The money is tax-free and can be used any way you wish – to pay for private medical treatment or to cover your mortgage, other loans and household bills while you’re undergoing treatment. You could even pay for your home to be adapted to cater for your needs.

You’ll often be offered critical illness insurance at the same time as taking out life insurance, which makes it slightly cheaper. On the whole, critical illness cover is expensive as those who do make a claim often receive many thousands of pounds.

All policies cover at least seven main medical conditions: cancer, coronary artery bypass, heart attack, kidney failure, major organ transplant, multiple sclerosis and stroke. These are laid down by the insurance trade body, the Association of British Insurers.

What should I look out for?

Cheapest is not often best with critical illness insurance. Better policies cover a wider range of illnesses – the average is 30 to 40 conditions but it can be as high as 160. The definitions are often tightly drawn. You do need to read the terms and conditions carefully. These can be quite stringent.

For instance, with improvements in catching cancer early, you may find that your cancer isn’t at the right stage to trigger a pay-out, or that the type of cancer you have doesn’t even qualify.

Other policies state you have to have the condition before a certain age, such as 60, or that it must be irreversible and incurable. You might find, for example, that you aren’t paid out for a heart attack or stroke if you are not left with permanent symptoms.

Half of all claims for total or permanent disability are declined because they are not considered to be complete or a permanent condition.

Most insurers insist you must survive for at least 28 days after being diagnosed to be able to claim but it could be longer, so read the conditions closely before signing up. This way you’ll know what you’re buying and what to expect if you make a claim.

One typical reason for a claim to be rejected is because you didn’t tell the insurer about previous illnesses or conditions you have suffered, no matter how long ago. Not being open and honest with your insurer means they might refuse your claim on the grounds of non-disclosure.

You should tell them as much as you can about your medical history when you apply. Some insurers will ask for a report from your doctor. The application forms are long and complex but need to be completed carefully.

There are a number of common exclusions. You won’t be covered for HIV or AIDS, and your claim will be rejected if you’re injured and disabled because you took part in dangerous sports such as off-piste skiing, mountaineering or boxing. Self-inflicted injuries are also not a reason to claim.

Your best guide is to look at the claims history of different insurers – the better ones pay out more than 90% of claims. This information is freely available on their websites. If it isn’t there you may question whether the insurer is right for you.

Because critical illness policies are complex it’s a good idea to speak to a specialist, independent advisor who will shop around for the right policy for you.  Our advisors can help you compare policies and prices from the entire market for free. They are impartial and won’t give you a hard sell. They will even fill out the form for you.

You can reach them on 0800 170 1970 or click on the ‘Chat Now’ button to have a live chat over the internet.

How much does it cost?

The premiums vary from one insurer to another but they will all take your age and medical history into account. They will even consider your family’s medical history, for instance, you may be asked about your parents and siblings’ state of health.

Whether you are a smoker, or have been in the past, the job you do and where you live are all factors that will be considered. Naturally if you take part in hazardous sports or have a risky occupation the cost will be higher or you may be turned down altogether.

Don’t assume all insurers are the same – the importance they attach to each piece of information you provide differs. That’s why it helps to have one of our experienced advisors to shop around for you.

Do first check whether your employer offers you any form of protection – many will provide some life insurance – and some provide critical illness cover as part of your benefits package. If you already have life insurance, check you didn’t take out critical illness alongside it.