If you were to develop a serious illness, you may be unable to work. Critical illness cover could provide a tax-free lump sum. This would give you the ability to carry on living your life while undergoing treatment.
While we all hope it never happens to us, this type of insurance could give you a certain peace of mind.
What is critical illness cover?
Critical illness cover pays out if a policyholder is diagnosed with a critical illness. The cover will last for a fixed period of time. If you stop paying your premiums, your cover will stop too.
Your insurer will be able to provide a list of illnesses that the policy will cover. This list differs between insurers.
As an example, it might cover conditions such as cancer, HIV, loss of limbs, kidney failure or a stroke. But your policy might restrict the cases in which it will pay out. For example, the condition may need to be a particular severity before you qualify for a payout.
What happens if I’m diagnosed with a critical illness?
If you’re diagnosed with a critical illness while your policy is active, the insurer will pay a lump sum to you. The amount will be set out in your agreement with them.
You don’t have to pay tax on money paid out, and you can use it in whatever way you wish.
You could use it to help pay off any outstanding debts or pay for medical bills. If you’re not able to work for a while, you could also use it to maintain a lifestyle you enjoy until you recover.
Life insurance with critical illness cover
Critical illness cover is often sold alongside life insurance. In fact, many insurers don’t sell critical illness cover as a standalone product at all.
Having two different types of cover might mean you pay a little more in your monthly premiums. But it does offer a convenient way of covering all the bases.
Be careful filling in the forms
It’s extremely important that you take a lot of care when filling in forms for your insurance. Your policy might not be valid if you supply information that isn’t true.
What that means is that you might not get the money that you need in a worst-case scenario.
If you realise you’ve made a mistake with the forms, contact your insurer as soon as you can to correct it.