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Should I consider critical illness cover?

16 DECEMBER 2011

 

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Many people will routinely take out life insurance when they take on the responsibility of a mortgage, to ensure that their family is protected if the worst comes to the worst. But while cover in case of death is one thing, fewer people tend to insure themselves against critical illness – although claims statistics suggest you are five times more likely to suffer from one of these than you are to die before you reach 65.

Critical illness cover is designed to ease the financial burden in a situation where you have a condition which has a serious effect on your lifestyle. It can pay out a lump sum if you die or are diagnosed with one of around 30 to 40 illnesses or disabilities – something that can go towards maintaining your lifestyle. According to the Association of British Insurers, in 2010 the total paid out through life insurance and critical illness policies came to £1.9 billion, with an average lump sum of just over £47,000.

Protecting your lifestyle
There are many situations where this could be beneficial. Critical illness cover can be a particularly good idea when your circumstances have changed due to a major event, such as having a child.

But while having cover to meet your commitments to dependants is obviously important, a single person who has just taken on a mortgage – but has no-one else to help meet the payments – could also benefit from critical illness cover. Meanwhile, if you are part of a couple with young children, being able to provide a boost to the family finances at a time when you are all feeling great stress could be a way of helping your loved ones to get through a difficult period.

And with increasing numbers of people living well into old age, there are many people still paying off their mortgage while shouldering the responsibility of being carers to their parents - and contributing to their own children’s progress through university.

What exactly is critical illness?
It’s unlikely that anyone wants to think too closely about being struck down with a condition that will seriously affect their quality of life and their livelihood, but it could make sense to protect yourself against this eventuality. Cover can provide the breathing space of allowing sufferers and their families to recover from conditions, preserving their lifestyle and protecting their home in the meantime.

Illnesses and disabilities covered typically include cancer, heart attacks and strokes. While any variant of these is likely to be of a relatively serious nature, to qualify for a claim, the symptoms usually need to be permanent. Likewise, due to medical advances in combating previously life-changing conditions, policies often specify a level of severity before paying out. Cancer, for example, must have spread or reached a certain level– in other words, it must have a serious impact on your lifestyle – in order for a sufferer to make a claim.

Insurers should set out these exclusions in policy documents so you know where you stand. And for your part – as with any insurance – it is a requirement to be honest about your medical history when applying for life insurance cover. Doing otherwise could invalidate your policy.

Sainsbury’s Finance is a trading name of Sainsbury’s Bank plc. All information correct at time of publication, but may be subject to change. Any views or opinions expressed in this article are the responsibility of the author and do not necessarily reflect the views of any part of the Sainsbury’s Group of companies.

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