Do You Need Critical Illness Cover?

The purpose of this piece is to explain some of the nuances of an extremely important form of insurance: critical illness cover.

What is Critical Illness Cover?

In essence this is an insurance policy which pays out a tax free lump sum on the diagnosis of a critical illness. It is designed to help those people unfortunately diagnosed to concentrate on a full recovery, rather than the extra financial burden the illness might cause. It also relinquishes the financial burden of having to pay for specialist treatment.

As with most types of insurance, it has no monetary value other than your peace of mind. If, however, a claim arises, it is likely to be the best piece of financial planning you have done.

With two in five people being diagnosed with a critical illness in the UK, these policies are relatively commonplace and have been for a long time. Critical Illness policies are more expensive than life insurance as the chances of having a critical illness are more likely than death before age 65 (most policies run to age 65).

The market is full of various critical illness policies, so it is important to pick the most appropriate. It is often the case that people do not to read the small print: they either go for the cheapest cover, the one that covers the most illnesses or they rely on a tied adviser who can only recommend a select few products.

The introduction of comparison sites and standalone insurance brokers has only added fuel to this fire and this is where things become interesting.

85% of all critical illness claims are in relation to four illnesses: Cancer, Heart Attack, Stroke, and Multiple Sclerosis. If you were diagnosed with a critical illness, whether it be one of the previously mentioned illnesses or not, you want to know the level of payout you are going to receive. You don’t want to be asked ‘how severe is your cancer?’ – especially as this makes up 66% of all claims

Certain critical illness policies will pay out partially depending on the severity levels of cancer. Certain policies also cover more illnesses than others and some policies have gender specific illnesses which allow them to be more beneficial to that particular gender.

Here at First Wealth, we enlist the help of a GP to run through every policy wording, meaning we truly are experts in the field. We are more than happy to offer existing or new clients a free review to ensure that their contract is right for them.

This document is marketing material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.