|
Critical Illness Cover Uncovered
by David Miles
It is a sad fact that many of us will know someone who has
suffered from a critical illness. Despite medical advances,
critical illness is still all too common. Critical illness
conditions include such things as cancer, heart attacks,
strokes, multiple sclerosis, leukaemia, and total permanent
disability.
Being diagnosed with a critical illness doesn't only spell
emotional and physical turmoil. It can also mean financial
disaster. If you are unable to work due to a critical illness,
or if you have to give up work to look after a child with a
serious medical condition, you could quickly find yourself
struggling to meet your financial commitments such as the
mortgage and other regular bills. And all this at a time when
you may be having to find additional money to pay for medical
treatment or the costs of ongoing medical care.
With little support available from the State - less than £60 per
week if qualify for Disability Living Allowance and just over
£70 per week if you qualify for long-term Incapacity Benefit -
you could soon find yourself in serious financial trouble.
Fortunately, there are steps you can take to help protect
yourself from the financial implications of suffering from a
critical illness. Whilst the doctors get on with their job of
looking after your health, critical illness insurance can help
you avoid worrying about money and leave you free to concentrate
on getting better.
Critical illness insurance provides you with a substantial
tax-free cash lump sum if you are diagnosed with a serious
illness. Different policies cover different ranges of medical
conditions, but the one thing they all have in common is that
they will pay you your chosen level of benefit as a tax-free
lump sum in the event of your being diagnosed with one of the
insured conditions.
Providing critical illness cover for a sizeable sum is cheaper
than you might imagine, and can make a huge difference to your
quality of life in the event of a serious illness. For example,
once your claim is paid, you could use the money to clear your
mortgage or take a holiday to help aid your recovery.
It is easy to argue that anyone who has a mortgage should
definitely take out critical illness protection, but the same
can apply to anyone who has regular financial commitments that
they would find hard to meet in the event of being unable to
work following diagnosis of a serious medical condition. In
fact, in many ways, critical illness cover is even more
important than life insurance, because in this day and age,
advances in medical science mean you are more likely to
initially survive a critical illness than you are to die from
it.
When you suffer a serious illness it can take a long time to
recover. You may have to give up work completely to begin with,
and it may be a number of years before you are fit enough to
return to full time employment. If your critical illness leaves
you with a permanent disability you may have to change career,
thus leaving you with a lower salary than prior to your illness.
When deciding what level of critical illness cover to opt for,
there are a number of factors to take into account. If you were
in a position where you were unable to work for a number of
years after your illness, then you might need to live off your
critical illness benefit for longer than expected. Therefore, it
is sensible to try to cover a sum at least four or five times
your current annual salary. Remember to take into consideration
your mortgage any other outstanding loans and credit card debts
when deciding on a level of cover.
All critical illness policies have what is known as a survival
period. This is the length of time after you fall ill before
your claim can be processed. This is normally in the region of
two to four weeks. Then the insurer will need to gather medical
evidence and reports from your doctors to ensure the validity of
your critical illness claim. This process can take a few weeks
depending on the amount of information required. The insurance
companies who provide critical illness cover have specialist
medical claims staff who will make every effort to get your
benefit paid to you as quickly as possible.
In addition to providing critical illness protection for
yourself and your partner, it also makes sense to add on cover
for your children if you have any. Unfortunately, serious
illness amongst children is more common than you might like to
think. Historical claims records show that a substantial number
of claims are made on children's critical illness insurance,
mostly for leukaemia.
You might assume that if one of your children suffered a
critical illness, your household finances would be unaffected.
After all, they are not wage earners. However, in reality you
may want, or need, to give up your full time employment to look
after your child. In addition, their illness may give rise to
additional costs for medical treatment or nursing care. Money is
the last thing you want to be worrying about if one of your
children is taken seriously ill.
A large number of critical illness insurers automatically
provide cover for children, so it is worth checking this aspect
of the policy when deciding which critical illness provider to
opt for.
One of the most important things to be aware of when choosing a
critical illness protection plan is the list of illnesses and
conditions covered by the policy, as this varies from one
insurance provider to another.
All providers cover a certain range of core conditions, such as
cancer, stroke, heart attack, and multiple sclerosis. Other
companies may provide cover for additional conditions such as
loss of sight, loss of limb, or benign tumours. Statistics show,
however, that the majority of claims are for one of the core
conditions, which every insurer has to cover.
Critical illness insurance can be bought with either guaranteed
rate premiums or reviewable rate premiums. The former are
normally more expensive, but the premiums are guaranteed to
remain the same throughout the life of the policy. With
reviewable rates, the premiums are not guaranteed and so you may
have to pay more or less per month (almost certainly more!) as
the years go by.
Critical illness policies stay in force for a fixed period. The
period of cover you select is known as the term. A short-term
policy might run for perhaps ten years. Or you might want a
longer term policy of twenty-five years to coincide with your
mortgage. It is important to remember that your cover will end
completely as soon as the term is finished.
The other two things which will cause your policy to terminate
are if you die or if you make a critical illness claim. Once you
have claimed for a serious illness, it can be difficult to get
new cover, as you are seen by insurers as a higher risk. Some
companies offer a critical illness buy-back option, meaning that
if you do claim on your critical illness policy you can still
take out cover again with that same insurer. A buy-back facility
will increase your monthly premiums, but for the sake of what
may only be a few pounds per month, it is well worth considering
from the outset.
As you will see from everything we have said here, critical
illness policies can differ in price and provide differing
levels of cover and benefits. In addition, some policies cover
just critical illnesses, whilst others combine critical illness
protection with traditional life assurance.
It is therefore important to take expert independent financial
advice before deciding which critical illness policy is right
for you.
----
Copyright 2004 David Miles. You are welcome to reproduce this
article on your website, so long as it is published "as is"
(unedited) and with the author's bio paragraph (resource box)
and copyright information included. In addition, all links to
external websites must be left in place.
About the author:
David Miles is the editor of
TheCashClinic.com, a UK personal
finance
portal.
|
