If you’re lucky enough to have great physical health and genes, you’ll probably never have to use critical illness insurance. Some even go through life without ever learning about it.
However, in the unfortunate event of an urgent and life-threatening health emergency, your critical illness coverage can be the one thing that saves you from financial devastation.
But what exactly is critical illness insurance? How much critical illness cover do I need? Here’s a detailed guide about critical illness coverage, its advantages, and whether you and your family should consider it.
What Is Critical Illness Insurance?
Critical illness coverage is an insurance policy that offers financial support if you’re ever diagnosed with a life-threatening disease, such as cancer, stroke, or heart attack, or afflicted with a disability from a serious injury.
These major health conditions often mean a huge hit to your finances, whether from the long-term medical costs, travel expenses, or the fact that you’ll need to stop working and lose a significant amount of income.
The insurance supports you by providing a lump sum of money to help pay for your treatment. This tax-free, one-off payment can also be used for non-medical purposes, including mortgages, transportation, child care, and more.
Some serious illnesses can leave you with a disability or a permanent symptom that affects your functioning. In this case, you may use the money received from critical illness coverage to apply certain renovations to your home, like wheelchair access, should you need it.
It’s worth noting that critical illness policies typically only pay out once, after which the insurance ends. That means you may not receive any more financial assistance in cases of a second heart attack or stroke.
What Is Considered Critical Illness?
The diseases and injuries covered in critical illness insurance often differ from one insurer to another. Some comprehensive policies cover 50 or more health conditions while some may include fewer.
Here’s a list of what may be covered in your critical illness insurance:
- Heart attack
- Stroke
- Multiple sclerosis
- Parkinson’s disease
- Alzheimer’s disease
- Major organ transplant
- Traumatic head injuries
- Loss of important limbs
- Coronary artery bypass surgery
- Some types and stages of cancers
- Permanent disabilities as a result of chronic diseases
The total sum you receive will often depend on the severity of the illness or injury. Some policies pay less for less serious medical conditions. Your insurer should specify what counts as a “severe condition” to qualify for a claim.
Pre-existing diseases, non-invasive cancers, high blood pressure, and non-threatening physical injuries are often excluded from critical illness coverage.
Why Is Critical Illness Cover Important?
Critical illness insurance is important because in many cases, life-threatening diseases come with exorbitant costs your standard health insurance policy won’t be able to cover.
If your condition forces you to stay home or be admitted to a hospital, you might expect payment benefits or partial income from your employer. However, they might not be enough to cover the medical bills alongside your daily expenses in the long run.
Companies also usually move employees on paid sick leave onto Statutory Sick Pay (SSP) within a few months.
The sum assured from critical illness insurance can be incredibly beneficial if:
- You and your family heavily depend on your income
- Your company doesn’t cover long-term paid sick benefits
- You don’t have enough money saved for instances of medical emergencies
- Your work involves a higher risk of life-threatening injuries
Because of its practical advantages, many choose to take out standard health insurance or income protection alongside critical illness coverage.
How Much Critical Illness Cover Do You Need?
While there’s no one-size-fits-all answer to this question, there are several ways to calculate (or at least assess) how much critical illness coverage you need.
You want to consider how to support yourself and your family if something happens to your health. Your present financial situation is also a massive factor.
Think about the following when considering a critical illness policy:
- Regular bills
- Current debt
- General living costs
- Mortgage payments
- Genetics and medical history
- The number of your dependents
- Loans you’re presently paying off
- Savings or assets you can use
- Work benefits you’re expecting to receive
- Other insurances (health, life, income protection, etc.)
Ideally, you want the critical illness insurance to equal two to five times your annual income to secure a comfortable living while recuperating from your condition.
The best way to be certain is to inquire with a financial advisor or a specialist broker to advise on the coverage you need.
How Much Does Critical Illness Insurance Cost?
Critical illness insurance costs about £25 per month for level-term cover. This can go lower or higher based on several factors.
For example, if your family has a history of a major illness, the insurers may decide to exclude that specific condition from the policy. Otherwise, you may have to pay more.
Other factors that can affect your monthly premium include:
- Your level of cover
- Your age at the time of application
- Your sex (men often make more claims than women)
- Your family’s medical history
- Your smoking habits
- Your job and whether it exposes you to higher risks
Most insurers offer two types of critical illness insurance premiums: guaranteed and reviewable.
Guaranteed critical illness coverage typically costs more from the outset, with a fixed premium until the policy ends. On the other hand, reviewable critical illness coverage starts lower in the first few years and increases over time.
Final Thoughts
More than a massive hassle, getting sick can be expensive. Even as simple as a common cold or flu could mean losing valuable time and money you could spend on other important things.
Critical illness coverage is all about peace of mind. Having some form of security in times of unpredicted health troubles can be incredibly helpful in curbing financial strain.
That said, how much cover you need largely depends on your situation. But most experts recommend getting insurance two or five times your annual income.
If you’re still unsure, don’t hesitate to reach out and get assistance from our team of specialists at When The Bank Says No!