Critical protection for patients
CRITICAL ILLNESS insurance is often one of the most overlooked areas of financial protection and, in 2015, a total of more than £1.12 billion was paid out in the UK alone resulting from 17,045 successful claims. More than 93 per cent of all critical illness claims were successful (source: Association of British Insurers).
A life insurance policy is designed to facilitate the provision of a lump sum or regular payment, often for the benefit of family or business associates, upon death of the insured. In contrast, critical illness insurance can provide financial support sooner rather than later and at a time when it may be needed most.
Critical illness insurance pays out a tax-free lump sum if the insured is diagnosed with a critical illness as defined by the terms of the policy. It can therefore act as a most helpful financial cushion if the insured has to stop or reduce their work or other activities, for a short period of time or indeed indefinitely, just at a time when additional expenses resulting from the illness often occur.
Illnesses defined as “critical” vary from one provider to another, so it is important to check the terms of the policy carefully to determine what is covered. Generally, a critical illness is defined as one that results in a permanent change to your body, abiliof ties or lifestyle, such as heart attack, cancer, stroke, dementia, loss of limbs and blindness. In addition to “core illnesses” defined by the ABI, many providers cover a considerable number of additional conditions, some of which pay out the full sum assured and others, arguably less severe, pay out a lower sum.
It is possible that the insurer may restrict or exclude certain disorders if there is a family history or preexisting condition or premiums may be adjusted to ref lect the higher risk of claim. In addition, the terms of a policy will outline the degree of severity of a condition in order to pay out; for example, the early stages common cancers, particularly if encapsulated, may not be eligible for an immediate claim.
Critical illness cover can be a standalone policy or bolted on to a life insurance policy. Like all forms of insurance, one hopes a claim will never have to be made but it is sensible to be prepared. One never knows what life has in store. Critical illness insurance should therefore, at the very least, be considered as a key component of financial protection for family and business alike.
Graham Mendoza-Wolfson is a senior consultant with NLP Financial Management, 020 7472 5555, graham. email@example.com
Do not let finances be a casualty of serious illness