At different stages of life, unforeseen events can happen that can have a negative effect on your finances. With today being World Day for Safety and Health at Work, it seems an apt time to talk about this.

If you cannot work due to suffering from a critical illness, this could seriously affect your income. Fortunately, there is a way to protect you from this risk. Critical illness insurance cover provides a lump sum payment if you are seriously ill and this can limit the financial impact of losing your income.

How critical illness cover works

Critical illness cover is designed to protect you, your family and your dependants from financial hardship following the onset of a critical illness.

The largest debt that a household has is usually the mortgage. Critical illness cover can be used to pay off the mortgage, as well as provide income to pay the household bills.

Not all critical illnesses mean that a person will never work again. Due to advances in medicine, once fatal conditions, such as some forms of cancer, can be treated so that patients make a full recovery. However, many critical illnesses will mean an extensive period of convalescence, and money from a critical illness policy can be useful during this period. The money can also be used for medical treatments or being treated in a private hospital.

A critical illness policy can be combined with life insurance for added protection.

What is a critical illness?

Most common major illnesses will be covered by a critical illness insurances policy. These include cancer, blindness, heart attack, kidney failure, loss of a limb and strokes. A policy document will detail what is and isn’t covered by the policy. There will be some exclusions, including some types of cancer that are easily treated without requiring long periods off work.

Types of critical illness policies

If your main concern is paying off the mortgage, a decreasing term policy may be suitable. The lump sum covered in a decreasing policy lowers over time in line with the decreasing outstanding amount owed on the mortgage. The policy payments for a decreasing term policy are cheaper than a level term policy.

A level term policy pays a fixed sum, though this can be index linked so that its value is not depreciated by inflation.

You could buy two policies: a decreasing one to cover the mortgage, and a level term policy to cover regular household expenses.

The amount covered

A major consideration when choosing a critical illness policy is how much to insure, and this will depend on individual circumstances. Ideally, you need enough pay the household debts and bills with enough left over for a social life, holidays, and some luxuries. There may be other household members with an income that can contribute to the bills, but extra may needed.

Some employers will provide generous sick pay for the first few months off, so this needs to be taken into account when deciding on a sum to insure.

Buying a policy

For clear and unbiased critical illness advice, talk to Ascot Mortgages today. We’ll find the best critical illness policy to protect you and your dependants.