Critical Illness Cover - The In's and Out's
Published: 10th Aug 2010
Critical Illness Cover (CIC) is an often over looked insurance. While most people buying a new house will obtain some form of life assurance to cover a mortgage should the worst happen, fewer will look at Critical Illness Cover.
It can be obtained as a stand alone insurance or joined onto a Life Insurance policy which will pay on whichever event occurs first.
This type of insurance could be invaluable should you suffer a variety of illnesses. Claims statistics show that 1 in 4 women and 1 in 5 men will suffer a critical illness before they hit retirement age of 65. The illnesses covered do vary depending on the provider but all basic policies do cover the 7 most common claims of; severe types of cancer, heart attacks, strokes, multiple sclerosis, kidney failure, major organ transplant and coronary artery by-pass surgery in addition to numerous other conditions.
Critical Illness will pay out on being diagnosed with any of the diseases covered, usually in a lump sum, but some policies do pay out a monthly benefit. Once a claim has been made the policy ceases and has no value.
One of the major advantages to having Critical Illness Cover is a welcome financial boost in a time of major hardship. The policy could be used to pay off your mortgage so you have less monthly commitments to worry about at a very difficult time, which could require yourself to take an extended amount of time off work. It could also allow for a loved one or a partner to be able to take some time off work to care for you.
The money can also pay for expensive private medical treatment which many people will see as a genuine alternative to NHS waiting lists. The aim of CIC is to make financial commitments as easy as possible and stop any additional worrying in a time of great hardship.
There is with most policies a survival period, which occurs as soon as the illness has been diagnosed. These are typically 14 days and if the person covered makes a full recovery they do retain the full amount of the payout. The other downfall of typical policies are that they do exclude pre-existing medical conditions, which can make it very hard for people with bad medical history to obtain cover for that particular condition. They can usually get Critical Illness Cover for everything but the specific condition though.
The younger a person is when they take out a Critical Illness Insurance policy the cheaper the premiums paid each month are. In general, premiums are either fixed or reviewable, and whilst reviewable premiums may be cheaper to begin with they are also likely to rise over the life of the policy while guaranteed premiums will stay exactly the same every month. This ensures there wont be any unaffordable price hikes 5 or 10 years down the line due to medical advancements.
Like with most subjects, insurance comes with its own language which can include its own confusing terminology. Our Jargon buster aims to help you clarify what some of the terminology you might find on our website means so that you can fully understand the policies and covers you are considering.