Life and Critical Illness Insurance

Critical Illness Insurance (CIC) pays out a tax free lump sum in the event of you suffering a serious illness or if you have to undergo certain types of surgery. This lump sum is aimed to alleviate the extra costs of living with a particular condition. It is important to note that it only pays out if you contract one of a defined list of illnesses. In other words, if your illness is not on the list you will not get anything.

Almost 90% of all critical illness claims are for one of the following: cancer, coronary artery bypass surgery, heart attack, kidney failure, organ transplants and strokes. These are defined as the core illnesses and are usually on the list of defined illnesses. If you request others, possibly hereditary illnesses to be added, you will pay more. Your premiums will also be higher if one of the core illnesses is hereditary.

Critical illness insurance may well make sense for you unless you have substantial savings or other sources of income other than your primary income. How much you should  be covered for depends on your circumstances, but before thinking what you could currently comfortably live off, take the following into consideration. If you were to contract a serious illness making earning a living extremely difficult or impossible, you may like to pay off your mortgage and have money available to make alterations to your home, for instance putting in ramps and a stairlift if you were wheelchair bound.

If you think you would be able to manage from your own or your partner's savings, then critical illness insurance may be unnecessary for you and it may be more appropriate to concentrate on income protection.

Assuming that you do want critical illness cover, there is a wide range of policies available. Your monthly premium will depend on your age, sex, health, occupation, whether or not you smoke, the type of cover you need, and how long you need it.

Normally a set premium for a set amount of time is the case, but some policies are flexible so that you can increase the level of cover as you get older. If you are saving money as you get older, it is more likely that you would want your level of cover to be reducing rather than increasing as you do not want to be paying for something you do not need.

It is possible to obtain policies which cover different people, for example, you may like your spouse to be on your policy. Always be mindful of the small print as policy might only pay out for the first of you to become critically ill. You can also have policies that automatically cover your children when they reach a certain age, but the small print needs checking.

Critical illness policies are often bundled in with a life insurance policy. If you choose one of these make sure that it covers exactly what you want it to. A bundled product is cheaper than two individual ones but may only pay out once. For example, if you contracted a serious illness and then died after a period of time, you might find that the bundled policy does not pay out on death after having already paid out for the serious illness. Separate policies would pay out for both and are preferable even if they are more expensive.

Total and Permanent Disability  insurance is available on most critical illness policies, this pays out if you become unable to work due to a permanent disability arising from any illness or injury, regardless of whether it is listed in the policy.

If you have Income Protection Insurance it is worth considering the following before including Total and Permanent Disability. Critical illness insurance pays out a lump sum, so you could pay off your mortgage, whereas Income Protection pays an income to enable you to pay your monthly mortgage payments and other bills for as long as you are unable to work, which would you prefer?

Blue Moon can only offer advice on non investment insurance contracts. For a no obligation life insurance quote from a fully qualified adviser click on the button below and fill in the form, or call us on 0800 011 20 21 and one of our advisers will find the right life insurance cover for you.