Critical Illness

There are plenty of medical conditions and illnesses that, although not immediately fatal, have a serious impact on both our lifestyles and, crucially, our ability to earn a living. And that's where critical illness cover comes in. Critical Illness Insurance covers an individual for life or for a set period against a number of serious illnesses, diseases and medical conditions. Critical Illness cover either pays out a lump sum or provides and income if you are diagnosed with having one of a number of illnesses, including cancer, strokes and heart disease. And the policy will pay out even if you subsequently make a full recovery.

Heart disease, strokes and cancer are the most common causes of death in the UK, but advances in medical science mean that more people survive these serious illnesses every year. Conditions that were once almost always fatal can now be treated - if not actually cured - and the victim might well live on for decades afterwards. This is one reason more people are looking at critical illness cover, either alongside or as an alternative to a life assurance policy.

A policy could help someone with a critical illness pay off the mortgage or other loans, compensate for a loss of income from work, or pay for the children to finish their education. Alternatively, it could pay for modifications to the house and car to make them more suitable for someone with a disability.

More than three-quarters of critical illness policies are sold as an 'accelerated benefits rider' to life assurance policies. This means a policyholder receives his or her life assurance payment once a critical illness is diagnosed, rather than on death. If the policyholder makes a full recovery, the payment is still theirs to keep. If they subsequently die, however, there is no additional life assurance payment. If they die suddenly - or within the 'survival period' - the life policy pays out in the normal way.

Alternatively you could have a standalone critical illness policy which will usually cover the same range of sicknesses as the critical illness part of a combined policy. The difference is that someone who suffers critical illness can make a claim, but any life assurance is unaffected. Should they eventually succumb to the illness, their estate will receive a further lump sum. However, this means that you will be paying for two policies and there would be no payment from the critical illness policy if the policyholder were to die in an accident.

The selection of a suitable critical illness policy is dependent on the individuals circumstances and should be discussed with a Financial Adviser.