Get critical illness cover for peace of mind
Illnesses that used to be fatal are now survivable, so it makes sense to protect yourself from the fallout.
Phil Smith received £1.2m payout from his critical illness insurance after being diagnosed with skin cancer. He now has the all-clear and his family has financial security. Photo: Christopher Jones
Nearly two-thirds of the population have no form of financial protection if they die or become critically ill, despite advances in medicine and technology that mean more people are living longer and surviving illnesses that used to be fatal. In research conducted by insurer Aviva, most people aged 45 to 54, the age group most likely to claim, say they cannot afford protection.
But a debilitating illness can take years to recover from – and while your company may readily allow you sick leave, it can be restricted to a pay percentage or term length. Without a source of income, family savings can quickly dwindle on the essentials – let alone expensive medical care, or unexpected costs.
Although most homebuyers take out life cover to ensure loved ones are provided for in the event of their death, few people realise the financial implications of surviving – but in serious ill health.
"The diagnosis of a life-threatening illness can mean you will have to give up work temporarily or permanently and you may decide to pay for complementary treatments that are not available through the NHS to aid your recovery," warned Stephen Crosbie, of Aegon. "You're also still likely to incur costs such as mortgage repayments, loan repayments, utility bills and other living expenses."
Critical illness cover typically provides an individual with a lump-sum payment or monthly income if they survive for at least 14 days after being diagnosed with an illness that meets the policy's criteria. These can include cancer, Alzheimer's, multiple sclerosis, organ transplants, a stroke or heart attack among others. Cover cannot be purchased for a pre-existing illness and the younger and healthier you are, the lower your monthly premium – so it pays to be prepared. Premiums can be guaranteed or reviewable, meaning monthly payments are fixed for the term of the policy or can change on an annual basis. Customers can choose which type is best for them depending on their needs, as reviewable rates are initially cheaper, but the rates are reviewed every five years at which point they could increase. Guaranteed rates ensure customers pay the same premiums throughout the life of the policy.
As technology allows us to live longer, illness blights lives. Assuming you will be one of the lucky few is not practical – nearly two thirds of the population has not bought any form of protection, such as life insurance or critical illness cover, but one in three of us will be diagnosed with cancer, and every year about 146,000 people in Britain have a heart attack. Each year, 10,000 people under the age of 55 suffer a stroke.
Axa says that the average age at which people claim for critical illness cover is 43 for a man and 40 for a woman – a time when expenses are high, with children still at home and a mortgage outstanding. This means that without cover they may struggle.
You can buy critical illness cover in conjunction with life cover, and some company health policies include it as standard, so it is advisable to check what cover you have before taking out a new policy. Some life insurance policies may pay out if you are diagnosed with a terminal illness – but not if it is in the final year of the benefit term. If you are self-employed or run your own business, critical illness cover will not just protect your family should you become ill, but your business, too. Company policies may pay for your bills and mortgage, but they often won't stretch to other expenses such as child care or travel. Aviva offers ''integrated'' critical illness cover that includes life cover to a selected sum – usually the amount outstanding on the policy holder's mortgage.
When buying a critical illness cover, consider whether the policy matches your needs. For example, some insurers will automatically include children's critical illness cover to your plan – while others will have an option to include a spouse. You may want overseas cover should you spend time abroad, or are planning to retire overseas.
All of these inclusions will affect your premiums. Because of the individual requirements of a policy, these quotes from Axa are generalised, but
- a monthly premium for a healthy, non-smoking, 40-year-old male requiring £150,000 of critical illness cover over a 20-year term is £77.
- The monthly premium for a healthy, non-smoking, 40-year-old female requiring £150,000 over a 20-year term is £73.
- In comparison with life insurance, a monthly premium for a healthy, non-smoking, 40-year-old female requiring £150,000 of life cover over a 20-year term is £12.
- The monthly premium for a healthy, non-smoking, 40-year-old male requiring £150,000 of life cover over a 20-year term is £15.
Life cover may be affordable, but you are much more likely to become seriously ill than die before you reach retirement age.
To illustrate how the later you leave it, the more expensive cover is, just five years on,
- Axa's quote for a non-smoking male aged 45 years, based on a smaller benefit of £100,000 over a 20-year term, is £85 a month.
- Fortis quotes the same individual £75 a month, and
- PruProtect £96.
Statistics show that the number of critical illness claims paid out is increasing. In the past, insurers would have required a letter from the claimant's doctor detailing their full medical history. Due to new guidelines from the Association of British Insurers, now assurers require only medical details relating to the critical illness claim – so you are less likely to have your claim about cancer dismissed because of your non-disclosure about an ingrown toenail.
Additional information may be required if the insurer suspects the claim is fraudulent or the claimant is guilty of non-disclosure.
- Non-disclosure can lead to a claim being dismissed, but only if the insurer can prove it was deliberate.
- Alternatively, innocent or negligent non-disclosure relating to a misleading question or misinterpretation of the application form can still result in a payout.
It is not worth risking voiding your policy over misinterpretation, however, so it is always advisable to contact the insurer with any questions.
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Telegraph Life Insurance, provided by Click, enables you to compare prices from major life insurances in one simple call. To find more, please call 0800 180 4158 or visit life-insurance.telegraph.co.uk.
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