The majority of home owners take out life insurance cover with their first mortgage, but far fewer choose to opt for further peace of mind by arranging critical illness cover. You are, in fact, five times more likely to need cover against serious illness than you are life cover. For either the main salary earner in the family, or for a home-based spouse, the key question to consider when you are planning for your family’s future, is “What would happen if one of us were to have a severe illness?” It’s sometimes a tough question to confront, but if you really are keen to ensure that your family will survive the financial hit of a critical illness, it’s an extremely important one to think through. You may hope that your savings might cover a prolonged absence from work, or the significant costs that could be associated with a severe illness, but to avoid eating into savings, and to provide greater certainty that in the event of a crisis you will have financial security, critical illness cover can provide real peace of mind.
Various financial service providers offer critical illness cover that often gives you a choice of guaranteed or reviewable premiums, life cover, and also includes your children at no extra charge. There are two different types of assurance to choose from – level term, which includes critical illness, or mortgage term with critical illness cover included, which you can choose to run on a decreasing cover basis during your plan, approximately in line with the sum that you owe on a repayment mortgage.
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So what does critical illness cover provide? Critical illness assurance pays out a tax-free lump sum on diagnosis of any one of a list of serious illnesses. You can use the lump sum to pay for on-going medical treatment, or invest it to provide a regular income. You might also find that you need to make alterations to your house to help with decreased mobility, or that you have to pay for support over a period of time whilst you recover – any one of a number of unpredictable expenses can crop up during such a crisis.
Critical illness cover tends not to be expensive, but you will get a better deal if you set up cover when you are young, as the cost tends to rise quite sharply as you get older. Firstly, you need to decide on the sum that you wish to insure, which will often be the outstanding balance on your mortgage. The sum insured is paid out on the diagnosis of the critical conditions listed in your provider’s policy – and it really is worth reading through the fine print here. Whilst most providers will cover cancer, for instance, they may not regard “early stage” cancer as coming under the definition of critical. So it’s important that you inform yourself about what you might expect, and which conditions will not be covered under the terms of your policy.
