Everything you need to know about critical illness cover

If you were to suffer a serious illness, could you and your family cope? Thousands of people across the UK are faced with this situation every week and dealing with your finances in this scenario can add to already high stress levels.

You are more likely to become seriously ill during your working life than you are to die. However, while many people have made provision for their dependents through life insurance, fewer have considered what they would do if they were seriously ill and could neither work nor look after their loved ones.

In our guide, we look at the main benefits of critical illness cover. Keep reading to find out why you should consider this type of protection and what it can do for you.

What is critical illness protection and what does it cover?

While millions of people benefit from the piece of mind of life insurance, far fewer consider critical illness protection. Modern medicine has made it so that more people will live through critical conditions and therefore you could recover and then face the after-effects of an impaired and financially compromised life.

According to the Association of British Insurers (ABI), of the 26.4 million households in the UK in 2012, an estimated 20.2 million have contents insurance, 19.6 million have motor insurance, and 17 million have mortgage protection.

However, cancer, heart attack and stroke – the three key conditions in any critical illness cover – affect a large number of people every year. It is estimated that more than 330,000 people develop cancer each year, over 160,000 die from heart and circulatory diseases and a further 150,000 suffer strokes.

You can protect yourself against these illnesses. Critical illness plans vary from provider to provider but policies will usually pay out a lump sum if your illness meets its specified coverage guidelines. This differs from income protection, which is often thought of as an alternative to critical illness, as it pays an income for a set period if you are declared unfit to work for any reason.

Every critical illness plan is unique in terms of the illnesses it covers, but cancer, stroke and heart attack are the core conditions that the ABI requires to be covered in all policies.

Certain policies have standard exclusions. For example, self-inflicted injuries and suicide are often excluded while some professions – astronauts, roofers and abattoir works, for example – may struggle to get cover because of the nature of their work.

Specific illnesses also have age stipulations. You will often find that dementia is often only covered if it is pre-senile, that is, before age 65. Total permanent disability and Parkinson’s disease also often contain age restrictions.

How your premiums are worked out

Your premium is mainly based on your age, your medical history and whether or not you smoke. Following the European Court of Justice‘s gender directive ruling in 2011, there is no difference in the cost of premiums between men and women. Premiums for smokers are normally around 50 per cent higher than the cost for non-smokers.

Your premium will also depend on the amount of cover you want to take out. Mark Jones, head of protection at LV=, says, “When taking out critical illness cover it is important that individuals consider their medical history and what existing protection policies they may already have in place.

“Looking at their financial commitments will help them to ascertain the level of cover they require. It is also worth considering what their employer would pay out if they were out of work due to ill health.”

It can also pay to take out cover when you are young. Mr Jones adds: “Although milestones such as starting a family and purchasing a property tend to be points at which people consider protection, the best time for anyone to take out protection products such as critical illness cover is when they have youth on their side. As they are less likely to have suffered from any major medical event, this makes premiums cheaper.”