Critical Illness and Life Cover

By: Katie Jenkins
20-May-2010

Critical illness and life cover go hand in hand when you are looking for a way of ensuring that your loved ones are financially protected against any eventuality.  Dealing with a critical illness is extremely difficult both for the sufferer and for their family, but including critical illness cover on your life insurance policy at least means that as a family you would not also have to bear a huge financial burden due to losing an income and having to pay for treatment.

If you do not feel that you also need to take out life cover, critical illness cover can be taken out as a standalone policy.  However when people do opt to take it out in addition to a life insurance policy, the most common combination is to have a critical illness add-on to a decreasing term life insurance policy.  This is often because people wish to guard against becoming unable to work due to illness while they are still paying off a mortgage or another large debt, or while their children are still in full-time education.

Do bear in mind that critical illness and life cover is not the same thing as income protection insurance. You can start claiming on an income protection insurance policy (also known as ASU, or Accident, Sickness and Unemployment insurance) once you have been unable to work for a set period of time, say six months. This insurance will then pay you a monthly income equivalent to that which you received in full-time work, and will pay out for a limited period of time (that you specify when you take out the policy).  Critical illness cover is a lump sum payout for specific illnesses, and you can receive this as soon as you are diagnosed.

So what does a combination of critical illness and life cover offer you?  This type of policy would usually pay out a tax-free lump sum either if you died or you were diagnosed with a critical illness that is named within the policy.  It's important that when you are looking to take out this type of policy you read through the policy documents to make sure that you are aware of which illnesses are covered.  Being diagnosed with an illness is not the time to find out that your insurer will not cover you for it.

Whereas critical illness and life cover is a useful combination for someone with a family, if you're single and have no dependents, you may find that critical illness cover on its own is a better option for you.  This is because you could then afford to pay off any outstanding debts such as your mortgage balance if you were diagnosed with a critical illness. The best thing is to talk through your options with an experienced life insurance adviser.  They will have access to many policies across the market, and will be able to direct you to a suitable policy, be that a critical illness policy, life insurance or critical illness and life cover.

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