Critical Illness Insurance: It's Not That Morbid
The word “critical” can be morbid for some people, but others have to live with it whether they like it or not.
Fortunately, those who have to face it are given a lot of hope instead of wallowing in their pains and hardships. The solution referred to is the Critical Illness Insurance, which is a policy that pays out a tax free lump sum of money upon diagnosis of a specified critical illness.
Compared to that of life cover, Critical Illness Insurance pays out to yourself. This is more expensive than life cover, however you are far more likely to suffer a critical illness policy than to die.
A lot of companies have started offering free children's critical illness insurance in their policies especially in the UK. This means that when you take out the insurance, a number of your children or potential children are also covered under the policy. Each company's definitions of child insurance differs, such as one that offers 50% of your total insurance or £20,000 (whichever is lower) for each child, with a maximum of 3 children.
It is important to remember that any claims made on the children's insurance is not subtracted from yours and does not mean that your own insurance will be stopped.
The amount of critical illness insurance needed will depend on how much you require. You could seek some advice before deciding from any legitimate advisors on the topic. There are also some people, who cover mortgage's and debts with this type of insurance, however this is not always possible due to cost.
It is recommended that if it's too expensive to cover the full amount of your mortgage/loan then you should consider covering a proportion of the liability or around 2-3 times your annual salary. This way at least you know that you have some additional income which can be used for mortgage payments, bills, specialist medical care or to make adaptations to your home if required.
Critical Illness Insurance premiums are calculated based on a number of factors including your gender, age, smoker status, medical history, height/weight and the amount/type of cover that you choose.
Some people consider this type of life insurance as similar to that of a lottery, wherein if you are found to be critically ill, a lump sum is given to you. Remember that the policy is meant to provide cover against the financial hardships that can arise from you being seriously ill. Take note that the tax free lump sum of money is given upon diagnosis of a specified critical illness. This is not related to your occupation and by default does not provide cover should you be unable to work. One such example is that somebody may suffer from a heart attack or becomes blind/deaf, whilst this would more than likely have a huge impact on their life, it may not stop them from working, in this instance a Critical Illness Insurance Policy would pay out.
Finally, each insurance company differs in its exclusions for Critical Illness payouts. Some common exclusions are drug related claims, self inflicted injuries and claims arisen from war. Other companies may exclude conditions from a policy if you have a pre-existing medical condition, so it is best that you read the full extent of your coverage before signing up.