Beginners' guide to Protection

Critical illness cover

How would you cope financially if you were suddenly diagnosed with a critical illness and what effect would it have on your lifestyle? Critical illness insurance can pay out a tax free cash sum should the insured person be diagnosed with one of a range of specified critical illnesses while the policy is in force. Critical Illness Cover can be either arranged on its own or attached to other forms of insurance, such as life cover.

Critical Illness polices can vary in the illnesses they cover but most cover illnesses which are consistent with the Association of British Insurers list of critical illnesses. These include cancer (but read the small print for exactly which ones are covered), heart attack and stroke. There are detailed definitions for each illness and conditions may be attached, so make sure you read the literature carefully. There’d be nothing worse than being diagnosed with one of these potentially life threatening illnesses and then finding out you won’t get the payout you expected.

 

You can choose the length of time you want the policy to run for— many will stop when you reach 70 years of age — but it could coincide with the end of your mortgage or children finishing school or university.

As with income protection, rates can be either ‘guaranteed’ or ‘reviewable’. A guaranteed policy could cost more, but gives you the peace of mind of knowing the amount you pay for the cover won’t change. With reviewable policies, the amount you pay may increase when premium rates are reviewed typically every five or ten years. Again there’ll usually be no limits to how much your premium may increase when rates are reviewed.