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Critical Illness Cover

Could you and your family cope financially if you were to become critically ill and could not work?
It’s not a nice question to consider, but it’s an important consideration. If you think you and your loved ones would struggle to pay the mortgage or meet the cost of other household bills, you should consider critical illness insurance.

What is critical illness cover?

Critical Illness Cover is a form of insurance which pays out a tax-free lump sum in the event that you are diagnosed with a specified illness or medical condition during the term of the policy.

Critical Illness Cover is not the same as life insurance. Critical Illness Cover will pay out a lump sum if you are diagnosed with a specific illness that is named in the policy. Life insurance pays out if you die during the term of the policy. It is possible to have a single policy that pays out either on death or on diagnosis of a life threatening illness, whichever event happens first.

Tax-free payout

The policy pays out a tax-free lump sum if you are diagnosed with one of a pre-defined list of serious health conditions within the policy term.
For example, if you take out a 25-year policy with a sum insured of £150,000 and you are diagnosed with a critical illness such as M.S. at any point during that period, you would be able to claim the £150,000.

You can spend the money how you wish, so you could use it to clear your mortgage or any debts, pay for medical bills or to adapt your home to your particular needs. In other words, it can offer much needed financial help in a time of crisis.
You could also invest some or all of the lump sum to generate an income for your family to live on.

Cover for children

Many insurers also offer children’s critical illness cover at no extra charge, though the pay-out is usually limited to between £10,000 and £25,000.

List of conditions

With critical illness cover, you should always read the small print carefully so that you understand exactly what the policy covers.

Single pay out

Most policies pay out only once. However, a number of insurers will make a small payment if you are diagnosed with a less severe illness. The policy will then continue and you could, in theory, lodge a further claim if you were diagnosed with a critical condition at a later stage, within the policy term.

Bringing costs down

Premiums for critical illness cover depend largely on the likelihood of a claim. So, the older you are and the more unhealthy you are, the higher the premium.
By adopting a healthier lifestyle, for example losing weight or quitting smoking, this may help to reduce your monthly premium.

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