If the coronavirus (COVID-19) pandemic has shown us anything, it’s that anyone can become ill at any age. Critical illness cover can help to minimise the financial impact on you and your loved ones, and give you peace of mind.
It’s not just for COVID either: if you were diagnosed with a critical illness, would you be able to cope financially? It’s easy to think ‘I’d cope, that’ll never happen to me’ but most of us know someone either directly or through friends and family that has been affected.
It’s also easy to think“I would cope, that’ll never happen to me”but most of us know someone either directly or through friends and family that has been affected by a critical illness or diagnosis. Even with the impressive progress of the UK vaccination programme, just under half the UK adult population are not yet vaccinated. If you needed to give up work as a result of becoming seriously ill, a critical illness policy payout could help fund the mortgage or rent, everyday bills or even simple things like the weekly food shop.
Surviving financial hardship
Preparing for the worst is not something we want to think about when feeling fit and healthy, but you never know what life is going to throw at you next. After surviving a critical illness, the last thing you want is to worry about work. While you recover, you may not be able to return to work straight away. You might also ned to work reduced hours, or in a new position or role. Depending on the severity of your condition, you may also need to make home modifications, or self-fund private therapeutic care. It is sad to contemplate a situation where someone survives a serious illness - but fails to survive the ensuing financial hardship.
Tax-free lump sum
Critical illness cover is designed to pay you a tax-free lump sum either on its own or as part of a life assurance policy. It clicks in on the diagnosis of certain specified life-threatening or debilitating (but not necessarily fatal) conditions, such as:
- Heart attack
- Certain types/stages of cancer
- Multiple Sclerosis (MS)
Comprehensive policy for disability cover
A more comprehensive Critical Illness policy will cover many more serious conditions, including loss of sight, permanent loss of hearing and a total and permanent disability that stops you from working. Some policies also provide cover against the loss of limbs. However, not all conditions are necessarily covered, which is why you should always obtain professional financial advice.
Much-needed financial support when you need it
If you are single with no dependants, critical illness cover can be used to pay off your mortgage. This means that you would have fewer bills to pay, or a lump sum to use if you became very unwell. If you are part of a couple, a critical illness cover policy can provide much-needed financial support at a time of emotional stress to your partner or spouse.
Exclusions and limitations of critical illness cover
Always check the policy very carefully before committing, and take professional advice to check it covers your needs. The illnesses covered are specified in the policy along with any exclusions and limitations, which may differ between insurers. Critical illness policies usually only pay out once, so are not a replacement for income. Some policies offer combined life and critical illness cover. These pay out if you are diagnosed with a critical illness, or you die, whichever happens first.
Defined conditions in critical illness policies
A policy will provide cover only for conditions defined in the policy document. For a condition to be covered, your condition must meet the policy definition *exactly*. This can mean that some conditions, such as some forms of cancer, won't be covered if deemed insufficiently severe. Similarly, some conditions may not be covered if you suffer from them after reaching a certain age. Many policies will not cover Alzheimer's disease if diagnosed after the age of 60, for example.
Some policies allow you to increase your cover, particularly after lifestyle changes such as marriage, moving home or having children. If you cannot increase the cover under your existing policy, you could consider taking out a new policy to 'top up' your existing cover.
Very few critical illness policies will pay out as soon as you receive diagnosis of any of the conditions listed in the policy. Indeed, many pay out only after a ‘survival period’. Even if you meet the definition of the critical illness given in the policy, if you die within this period, the cover would not pay out.
Don’t miss out on benefits
If you already have an existing critical illness policy, and are thinking of switching, check your original policy carefully. You might find that by replacing your existing policy you would lose some of the benefits, especially if you have developed any illnesses since you took out the first policy. Always seek professional financial advice before considering replacing or switching your policy, as pre-existing conditions may not be covered under a new policy.
Policy costs and extend of cover
How much you pay for critical illness cover will depend on a range of factors including:
- What sort of policy you have chosen
- Your age
- The amount you want the policy to pay out
- Whether or not you smoke
Permanent, total disability is usually included in the policy. Some insurers define ‘permanent total disability’ as being unable to work as you normally would as a result of sickness. Others view it as being unable to independently perform three or more ‘Activities of Daily Living’ as a result of sickness or accident. Activities of daily living include:
- Dressing and undressing
- Transferring from bed to chair and back again
Make sure you’re fully covered
The good news is that medical advances mean more people than ever are surviving conditions that might have killed earlier generations. The even better news is that critical illness cover can provide cash to allow you to pursue a less stressful lifestyle while you recover from illness, or you can use it for any other purpose. Critical illness cover may not be top of your agenda in 2021, but don’t leave it to chance. Make sure you’re fully covered and you can relax and enjoy the ‘future normal’ - whatever that may bring!
Call Panthera Wealth for professional advice
To discuss your situation and whether critical illness cover is right for you, contact us here at Panthera Wealth.