A step by step guide to Critical illness insurance

What is it?

Life insurance is a basic insurance policy that pays out a lump sum in the event of the death of the policyholder Often this type of insurance is used to ensure that your family or dependants don’t suffer financially if you die.

When buying life insurance, extras are often offered as a form of more comprehensive cover at an additional cost, this includes critical illness insurance.

Critical illness insurance pays out a lump sum in the event of a stroke, heart attack, cancer or another specified life threatening, but not fatal, illness.

Often this type of cover is used by those who are worried about the financial pressure of paying off loans or mortgages if they are unable to continue to work.

In order to claim this tax free lump sum, normally you must survive at least one month after becoming critically ill.

Critical illness cover will pay out for a list of illness specified by the insurance company at specified severity.

Most insurance companies will now cover around 30 illnesses however this does differ from one company to the next.

Most insurers state you are unable to make a claim within the first 3 months of the policy and generally critical illness insurance will only pay out once; it is therefore not a replacement for income.

Why you might need it

People most commonly take out critical illness insurance when they take out a mortgage or have kids, however most providers allow you to take out cover between the ages of 17 and 70.

However some insurers will only insure up until the age of 60 and these policies may elxculde cover for illnesses like Alzhimers.

Cover can be bought for a number of years, for example the length of your mortage or for whole of life.

Alternatively you can take out a policy and keep it for as long as you see fit, for example until you no longer have dependants.

For those who have no dependants, then critical illness insurance that covers the mortgage is often more important than having life cover.

However for those who are part of a couple, critical illness insurance can also be a helpful finanfcial boost.

As with basic life insurance, time is of the essence when purchasing critical illness cover.

Improvements in medical technology has caused insurers to cut back on the conditions they cover or impose restrictions on what is classed as a critical illness.

How to get Critical illness insurance

Critical illness insurance can be purchased either directly from an insurance company , through a financial advisor or insurance broker.

If you chose to buy directly from the insurance company it should be noted that not all firms give advice, they only offer information.

Before going down this route you should either: seek independant advice or check to see what other companies have to offer.

In order to take out critical illness cover you will have to complete a proposal form, you will also have to provide a medical history and should check if any family members have suffered from any major illnesses in the past.

If they have then your policy may be rated, which potentially means higher premiums or you may not get cover for certain conditions.

Additionally before being accepted you may need to have a medical, this may occur if you have any pre-existing medical conditions.

However this does not necessarily mean higher premiums.

If you are a smoker you will have to go for a medical and your premiums will also be higher.

Note – It is incredibly important that you are honest about both your personal and your family medical history.

In the event that you do make a claim, if your insurer finds any information that you failed to disclose then your claim could be rejected.

If you are not sure whether a piece of information is important when detailing you and your families medical history, include it anyway as it may affect any claim you make later on.

The most common problem many applicants will have when making a claim is that of non-disclosure.

When you make a claim your insurance providers will trawl through you medical history and if they find incorrect information, for example if you said you were a non-smoker when infact you were then your claim will be rejected.

Types of policy

There are two main types of critical illness insurance available, these are:

Life and critical illness cover – pays out a lump sum either on death or when you are diagnosed with a critical illness.

Stand alone critical illness cover – pays out if you are diagnosed with a critical illness and survive for at lease 28 days after diagnosis.

What illnesses are covered?

Each insurer will only cover the conditions detailed in the policy summery or key features document which you should be supplied with before you take out cover.

However all critical illness policies should cover cancer, heart attack and stroke.

Detailed below are the model definitions of what is covered in a critical illness policy, meaning they are the minimum standard for the illnesses covered.

Individual insurance companies may impose further restrictions, for example, not all types of cancer are covered.

These definitions are grouped into “core” conditions and “additional” conditions, core definitions simply being those that are more likely to happen:

Core conditions

Cancer

coronary artery by-pass surgery

heart attack

kidney failure

major organ transplant

multiple sclerosis

stroke

Additional conditions

aorta graft surgery

benign brain tumour

blindness

coma

deafness

heart valve replacement or repair

loss of limbs

loss of speech

motor neurone disease

paralysis/paraplegia

Parkinson's disease

terminal illness

third degree burns

Some Insurance companies may not cover all of those listed or alternatively may offer cover for different illnesses.

Before going ahead with a poily it is essential that you seek advice to make sure you are getting the right cover.

Some things to think about

Before chosing which company to go with, customers should research the key features of every illness covered.

For example, if you are claiming for a heart attack, the insurer will require the medical evidence of the severity of the attack before you can make a claim.

Additionally some insurers may exclude any pre-existing medical conditions or others may make exclusions based on your family medical history.

If you are not sure whether a piece of information is important when detailing you and your families medical history, include it anyway as it may affect any claim you make later on.

What is the cost of Critical illness insurance?

Critical illness insurance will often be offered to customers when they take out a new mortgage for example.

However, it often does not pay to just accept this deal, and cheaper deals can be found online or over the phone through an insurance broker.

Using an insurance broker will additionally help you to compare quotes and make a more infromed decision.

However if you do chose to do this yourself then insurance policies can be compared using the key features documents offered by the insurers.

These give important information about the poilcy including prices and what illnesses are covered etc.

Most critical illness insurance policies require a regular premimum, which can be made either annually or monthly.

The price of the premium is based on the amount of cover you require, what you can afford and how long you need it for.

The premium amount can also be affected by your: sex, age, health, occupation and whether you are a smoker or non smoker.

Generally, premiums will be cheaper the younger you are but will also depend on your medical history.

Some providers may offer a discounted premium if they exclude any pre-existing medical conditions such as cancer, while others will not.

Additionally the amount of illnesses covered by the insurer may also affect the preimum, for example; more comprehensive cover- covering more illnesses- will normally be more expensive.

Some policies may also offer either reviewable or gauranteed (fixed) premiums.

Gauaranteed premiums remain the same throughout the whole policy whereas reviewable premiums can be subject to change.

Although origionally gauranteed premiums may be more expensive, in the long run they will generally work to your advantage.

For example if you develop a medical condition later on in life this will not affect a fixed permium but will significantly increase one that is reviewable.

Increasing your cover or changing your policy

Some policies will allow you to increase your cover, particularly after important lifestyle changes including having children, marriage or moving home.

However, if you are unable to increase your existing cover then it is possible to take out additional policies to add to your existing cover.

Before cancelling an old policy you should consider trying to increase the policy first as you may lose benefits from your existing plan; for example if you have developed any medical conditions since first taking it out.

A new policy, therefore, may not cover all your needs.

If you decide that you are no longer interested in taking a policy then most providers offer a 14 day cooling off period.

If you do change your mind within this time frame and inform your insurance provider immediately, then you should receive a full refund on your first payment.

Making a claim

If you wish to make a claim then you, or someone acting on your behalf, must inform the insurance company.

The insurer will then send you a claims form, which will ask for the details of your illness and the doctors you’ve been treated by.

Your insurance provider will then write to your doctors to collect information, such as the severity or stage of your condition.

If this then confirms you have suffered a critical illness covered by your policy, you claim will be paid promptly.

At this stage you may be asked to provide additional medical evidence, such as test reusults, to re-enforce your claim.

Any criteria on making a claim on your critical illness insurance will be detailed in the key features document.

As detailed in the key features document some conditions must be permanent before a claim will be paid.

Similarly some policies require that you live for a certain period after becoming critically ill to be able to make a claim.

This time period can vary, though is usually 1 month from the date of diagnosis.

However this may be up to 6 months to a year in the event of a permanent disability.

Some things to watch out for

Make sure you read the small print.

Before taking out a policy you should know exactly what critical illnesses you are covered for and any criteria that effects making a claim against them.

Many life insurance providers now offer insurance for children; alternatively some providers automatically cover children within your own policy.

By comparing providers you will be able to find the best quote for you.

All customers should receive a key features document before they take out the policy and if any critical illnesses are being omitted due to pre-existing medical conditions, this should be detailed beforehand.

Cancellation

Most polices can be cancelled within 30 days and you will receive a full refund provided you have not made a claim.

, this is often referred to as a “cooling off period.

” After the first 30 days most insurance providers will also allow you to cancel the policy at any point but you may not be entitled to a refund on the premiums you have paid.

Your cancellation rights will be detailed in the policy key features documents.

A step by step guide to Critical illness insurance