Critical illness cover pays out money if you are diagnosed with a specified serious illness.

If you are fit and well, you probably do not think about the possibility of becoming ill and being unable to work, but unfortunately, illness can strike a person at any time without warning. If you became ill and could not work, how would you pay the household bills? If you are buying your home with a mortgage, could you still afford the monthly repayments without the income from a job?

If you are self-employed, particularly as a sole trader, then illness could mean the closure of your business.

Coping with illness is bad enough without the financial burden of a vastly reduced income. There are government sickness benefits available, but these only cover basic living expenses, and will probably not extend to mortgage payments.

Taking out critical illness cover removes the financial anxiety associated with suffering from a critical illness.

Tax-free pay out

A critical illness policy normally has a long list of eligible illnesses and pays out a tax-free lump sum if you are diagnosed with a critical illness. For example, if you take out critical illness cover for £100,000 and have a stroke, then the full £100,000 will be paid out, and no tax will be depicted from it.

You are free to spend the money any way you wish. It could be used to pay off your mortgage, adapt your home to your needs, or the lump sum could be invested to provide an income.

Your family

Many critical illness policies also automatically cover your children, though the payouts will be considerably less than those for the main policy holder.

Combining with life insurance cover

If you combine critical illness cover with life insurance, the policy will usually cost less than paying for each one separately.

The conditions

A critical illness policy will usually have lots of terms and conditions concerning what is and what is not covered. For example, some forms of cancer that are easily treated may not be covered. Mild strokes and heart attacks may not be considered severe enough to be covered either.

Some policies will pay out a smaller sum if you are diagnosed with a less severe illness.

If you are a smoker or have an existing health condition, then this may mean paying higher premiums. You also need to give full disclosure about your health information, as a claim could be disqualified if you fail to provide accurate information.

It is important to read the policy fully, including the small print that sets out all the terms and conditions applied to the policy. An insurance broker can advise you if the policy appears confusing.

The best way to buy critical illness cover

The most effective way to choose from the many critical illness policies offered by insurance companies is to use a broker, who can advise you on finding the best deals to suit your particular circumstances. Call the team at Ascot Mortgages to benefit from our expert advice.