Is Critical Illness Cover worth it?

If you were to suffer a critical illness, how would it impact your everyday life? For many families, it could result in financial strain due to loss of income. If you had to stop working due to your illness, it may affect your ability to meet mortgage repayments and other living costs. 

For this reason, taking out critical illness cover might be an important consideration. However, if you are in good health, you may wonder whether it is worth taking out this type of insurance. In our latest blog, we offer some guidance on what this form of financial protection could do for you and your family.

Understanding what critical illness cover is

Critical illness cover, or CIC, provides a pay-out if you are diagnosed with a defined medical condition that is predetermined in the policy. Unfortunately, no one knows what is around the corner and it may be important to have sufficient cover in place should the unexpected happen.

As with other protection policies, you will pay a monthly premium and the policy will be set for a fixed term, which is decided during the application process. Critical illness cover is set for a fixed term, which is decided during the application process. It is important to consider things such as how long is left on your mortgage or when you are likely to retire.

What does CIC cover?

Critical illness cover could offer a pay-out for a serious, life-changing illness that is not necessarily terminal. There is a list of predetermined conditions set out in your policy documents; this can differ between insurers, so it is important to familiarise yourself with what is covered and what is not.

With most insurance providers, heart attacks, strokes and some forms and stages of cancer are covered. Other major illnesses covered may include Parkinson’s disease, Alzheimer’s disease, multiple sclerosis, and organ transplant,

The policy document will also set out how severe the illness must be to be eligible for a pay-out.

Do you need critical illness cover?

If you had to give up work due to falling ill with a critical illness, it is important to consider what financial situation you and your family would be in. Would you still be able to meet your financial commitments with a loss of income?

Before taking out this type of policy, decide whether you have savings to fall back on, or if you are already covered by any employee benefits. If you already have other insurance policies, think about whether that cover is sufficient for this scenario.

If you do not have these options available to you, and your lifestyle is therefore, likely to be affected by a critical illness, having this type of financial protection in place could be very worthwhile.

How much does it cost?

The cost can depend on your individual circumstances and needs. Factors such as lifestyle habits, age, medical history and even your job can have an impact on the cost of your monthly premiums.

The cost can also depend on the length of the policy and the amount you want to be insured for. It can be incredibly helpful to compare critical illness quotes to find the most suitable policy at an affordable price. At Caspian, our friendly and authorised team can do this on your behalf.

What are the benefits?

Critical illness cover offers a one-off lump sum, when you are diagnosed with one of the predetermined conditions listed in the policy document. It is important to remember that this policy type will only pay out once for the full sum assured.

Critical illness may also offer financial protection in the event of a child being diagnosed with a predetermined condition listed in your policy documents.

The pay-out can be used for whatever you deem necessary. For instance, if you require private medical treatment or need to make adaptations to your home. Often this form of payout can help you to cover your mortgage payments and other bills due to loss of income.

Critical illness cover and life insurance

Critical illness cover can either be added to a life insurance policy, or taken out separately. When the critical illness element is added, it is known as combined cover. The two are taken out simultaneously and you only need to pay one monthly premium. However, this type of combined policy will only pay out once, usually on which incident occurs first.

Standalone cover means you take out critical illness cover separately and pay for the two separate policies. You can choose to have the policy running alongside your life insurance, or on its own entirely. Standalone Critical Illness may have a survival period, which is a period of time you need to survive for before a claim would be considered.

When choosing whether to take out combined or standalone cover, consider your circumstances and financial situation.

Critical illness vs income protection

Critical illness cover and income protection are often confused as they can both help if you are unable to work due to illness. However, the two types of cover do differ. Critical illness will usually pay out a one-off payment, while income protection provides regular payments that are equivalent to a percentage of your salary after a waiting period which is chosen at the application stage.

As you know, critical illness cover will pay out on diagnosis of a condition that is listed in a pre-approved list. You do not have to be off work in order to make a claim. Income protection can pay out for a wider range of causes, and can include things like minor illnesses, accidents and mental health issues. Income protection is designed to help whilst you are unable to work due to an accident or sickness after the selected waiting period.