Some frequently asked questions about a critical illness policy

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Question

A critical illness insurance policy provides financial help if you are diagnosed with a serious illness. The policy normally pays out a lump sum if you suffer from a severe condition such as cancer.

A lot of people find the intricacies of such a policy confusing though, so this article seeks to answer some of those questions that crop up the most frequently:

Is a critical illness policy better than life insurance?

Life insurance and a critical illness policy are used for different purposes, so one is not ‘better’ than the other as such, but might be more suited to your circumstance.

Life insurance pays out a lump sum if the policyholder dies, whereas critical illness cover pays out whether your condition is terminal or not. It is advisable to take out both life insurance and critical illness insurance.

For total protection, you should also consider income protection insurance, which pays out regular sums based on a percentage of your salary if you cannot work through sickness or as a result of an accident.

How much should I insure?

When taking out a policy, you can decide on how much to insure. You will need enough to pay off the mortgage and household bills. You can choose a fixed sum that does not vary over time, or you could have an increasing sum that rises over time in line with inflation. People with a mortgage can select a decreasing sum that goes down as the mortgage is paid off.

The money paid out can be used for any purpose, be it the mortgage, household bills, or medical expenses. The payment is a one-off, as critical illness policies generally do not provide the policyholder with an income.

What is a critical illness?

There is no one answer to this question, because each insurer has a list of conditions that are covered and these do not always match from policy to policy. Most policies will include conditions such as heart attacks, cancer, deafness and dementia.

When making a claim, most insurance companies will take into account the severity of the condition. If, for example, you have a type of cancer that is easily cured without requiring much time off work, then you will probably not be paid out.

If you already have a critical illness then it is unlikely that you will be able to purchase critical illness cover.

How much does a critical illness policy cost?

The cost of a critical illness policy is dependent on the amount covered, the age of the policyholder and health-related factors like whether or not they smoke. Premiums can be at a fixed rate, or a variable rate that is liable to increase in the future.

Where can I get further advice and buy a critical illness policy?

At Ascot Mortgages, we have expert knowledge of a wide range of insurance providers and policies. A friendly adviser here can answer any further questions you have about critical illness insurance, and will find the right policy to suit your circumstances.

Talk to Ascot today to find out how you and your family can be protected from the financial burden that can arise as a result of a serious illness.

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