Be prepared with crucial cover if illness strikes

THERE are two types of cover that many people choose not to have but, in the event of a claim, are so appreciated.

These are critical illness (CI) and income protection (IP).

CI pays out if the person covered is diagnosed as suffering from any one of a specified list of medical conditions.

Examples include stroke, heart attack, certain types and stages of cancer, and conditions such as multiple sclerosis.

This can help pay off your mortgage, clear debts, or enable alterations to your home, such as wheelchair access, should you need it.

It’s normally a lump sum policy and the money is tax-free.

You probably won’t be covered for health problems you knew you had before you took out the insurance, and this type of insurance doesn’t pay out if you die, unless it is added to a life assurance policy.

You might not need CI if you have enough savings to fall back on, you have a partner who can cover living costs and any shared commitments, such as a mortgage, or you already have some cover as part of your employer’s employee benefits scheme.

IP provides a regular income where the person covered is unable to work as a result of illness or injury. There’s normally a waiting period, typically six months.

The income from the policy can then be paid for a fixed term or, the better option, until the person returns to work or reaches a selected retirement age.

According to the Association of British Insurers, every year one million of us find ourselves unable to work due to a serious illness or injury.

Most employers provide full or part salary for up to 12 months but, unless they also provide an IP policy, cover would be required for periods of ill-health longer than that. You could perhaps survive on government benefits though these might not be enough to cover all your outgoings.

IP would not be necessary if you have enough savings to support yourself, you could take early retirement, or your partner or family would support you.

There’s an obvious overlap where both covers would pay out – if somebody can’t work as a result of illness that’s covered until their CI policy – but plenty of circumstances where only one would pay.

If the person is off work as a result of an accident IP will pay but not CI. If the person suffers a heart attack but isn’t off work for very long CI will pay out but not IP.

It’s important to look carefully at both types of cover as cheapest isn’t necessarily best. Cover definitions vary between companies so accurate comparison is vital.

For both CI and IP, factors take in age, the amount of cover required, whether you smoke or have previously smoked, health including your weight and your family medical history, and your job as some occupations carry a higher risk than others. However, a ‘what would happen if ’ exercise might well justify the cost. Many people spend much more insuring their house, car or even pets than they do on covering their health.

And don’t be put off by incorrect assertions that some companies try to avoid their obligations because so many people claim. The overwhelming majority of claims are paid.

In 2017, for example, Aegon met 93.6 per cent of CI claims, averaging £86,037 with a top pay-out of £1.07 million. Over the same period it paid out 96 per cent of IP claims, averaging £17,760, £60,000 a year being the highest.

Better to be safe than sorry. You never know when injury or illness might strike.