Life insurance with critical illness coverage provides the insured with a cash lump sum in the event of the diagnosis of a life-threatening illness or death. Whilst many homeowners take out simple mortality coverage, far few take out any form of serious illness insurance. This is because they fail to appreciate the financial consequences of becoming seriously ill and being unable to work. The problem is further exacerbated by the fact that the premiums are higher than they would be for a regular term life policy.
Why is Life and Critical Illness Insurance so Important?
Bupa, a leading private medical insurer, produced a report that showed that a 35-year old male is 500% more likely to claim under a 25 year life and critical illness insurance than he would under a standard life policy. This higher incidence of claims indicates the considerable risk faced by young families and/or those with mortgages. Whilst more expensive than standard level term life insurance, it should never be considered to be a luxury that can be done without.
Pre-Existing Medical Conditions
The onus falls on the insured to disclose any previous medical conditions, such as an earlier heart attack or prostate cancer. Insurers will normally exclude these from a life and critical illness insurance policy. If they aren’t declared and are identified from a patient’s medical records, a policy will refuse to pay out. This is why it is important to be honest about smoking and drinking as it is better to pay a higher premium than be faced with a situation where the protection afforded is completely revoked. Just because a policy excludes a certain condition is unlikely to make it any cheaper.
When Will a Critical Illness Insurance Policy Pay Out?
Life and critical illness insurance coverage will pay out, provided that the insured survives for at least 14 days following diagnosis. The Association of British Insurers (ABI) has specified 23 life-threatening conditions where a critical illness policy must pay out. In practice, most policies will help the insured in the event of several other illnesses as well. For example, Bupa will pay out upon diagnosis of 37 different life-threatening conditions. The ABI is simply setting out the minimum criteria that its members are expected to adhere to.
Take Out Life Insurance with Critical Illness When Young
Although competition between life and critical illness insurance providers helps to keep premiums down, the earlier in life that a policy is taken out the cheaper it will be; you can use an Instant Insurance Cost Calculator to see where you stand. This is because the likelihood of developing a life-threatening illness is far lower when someone is younger. Remember that the cheapest policy isn’t necessarily the best. An independent financial advisory service will be able to help someone decide which critical illness policy offers the best value for money – both coverage and price.