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Many people have heard about life insurance, but what about critical illness cover? Both are similar in that they pay out a lump sum when the terms of the policy are met. This can be very useful for providing financial stability to your household during difficult times. Yet the two work differently in that a life insurance policy pays out when you die within its term limit; critical illness cover pays out when you are diagnosed with a condition specified within the policy.
Do you need critical illness cover if you have a life insurance policy? Which conditions does it cover, exactly? Below, our financial planning team at Hanson Financial Services in Liverpool addresses these (and other) commonly-asked questions. We hope you find this content helpful and invite you to contact us to discuss your own financial protection needs, when ready.
Do I need critical illness cover if I have life insurance?
Since the two types of financial protection pertain to different scenarios, it can often be useful to have both. After all, your premature death could certainly put huge financial strain on your family – yet so could your inability to work, long-term, due to a stroke. A range of factors need to be considered before deciding whether life insurance and critical illness cover are right for you. In particular, your net worth is important and so is your family status. For instance, if you are single (with no children) and have few assets as you start out in your career, it is likely that you need neither policy. However, if you are a homeowner with two young children, then these two forms of financial protection are usually much more relevant.
Which conditions are covered by critical illness cover?
You obviously cannot claim for a lump sum if you get the common cold. Yet which illnesses and conditions can be legitimately claimed for? Here, you will need to look carefully at the terms of the policy you are considering. A financial adviser can be especially useful here, bringing their experience to bear so you can check the fine print. Some policies will cover more conditions than others. For instance, some policies will cover breast and low-grade prostate cancer, but others may not be as comprehensive. Here, you will likely want to check your personal and family medical histories to ensure that you are covered for conditions/illnesses which you may be more vulnerable to.
What kinds of exclusions and limitations should I look out for?
Again, you will need to check the policy in question to be absolutely sure. However, policies will often limit the range of cancers they will cover (given the vast range of types, each with its own level of “seriousness”). Critical illness cover policies typically approach strokes and heart attacks in a similar fashion. Also, bear in mind that advances in medical technology and practices also means that what many people deem to be a “critical illness” is constantly changing. As such, for many conditions it will be necessary to prove to the insurer that your symptoms are permanent – not simply that you have been diagnosed with a condition.
How does critical illness cover work?
Your cover may look different to another person’s depending on how much you want to pay, the length of time it remains valid and the level of cover you want. A good general rule is to take out cover for as long as you expect there to be high demands on your income (e.g. a mortgage and children’s education costs). It will also be crucial to decide whether you want level or decreasing cover. The former involves choosing the lump sum you want and how long you want the cover to last. From there, you pay a regular amount each month until the policy ends. The latter lowers the amount of cover you get each month – with your regular payments staying the same. This can be cheaper in the long run, and is useful if you will use it to repay an outstanding mortgage (which should reduce over time).
Can I get cover after being diagnosed?
When you take out critical illness cover, insurers will ask you for your medical history (and likely that of close family members too). If you have a pre-existing condition, therefore, you will need to inform the company. This does not necessarily exclude you from getting cover, however. Just bear in mind that if you do not disclose to the company, then they will not pay out the lump sum later if they find out you lied in your initial application – even after all the premiums you would have paid. Here, a financial planner can help ensure you fill out the paperwork correctly and that everything integrates effectively into your wider financial plan.
Are you interested in talking to a financial adviser about your pension and investment planning needs? We’d love to assist you here at Hanson Financial Services.
Please contact us to arrange a consultation with our team – free and without obligation – to gain more clarity and peace of mind over your financial plan.
You can call us on:
Liverpool Office: 0151 708 7616
Manchester Office: 0161 401 0991
Chester Office: 01244 960 039Or email via: [email protected]