Pros and cons of critical illness cover

Critical illness cover is something that most young adults would consider taking out, new research shows.

But more than half of those questioned in the survey say they don’t know its purpose. And 29% admit they have no idea what it is.

The study found that once critical illness cover was explained, 4 out of 5 of the 18-40 year olds surveyed said they would consider it.

Not only did the survey show a lack of awareness, 21% were reluctant to think about what their loved ones would do if they became ill.

So, what is critical illness cover? And do you need it?

What is critical illness cover?

Critical illness cover is an insurance policy that pays a lump sum if you are diagnosed with an illness that stops you working.

No one wants to think about being so poorly or injured that they can’t work. But who knows what is around the corner? And should the worst happen, critical illness cover would mean you could pay your bills. That’s particularly useful if you don’t have any savings or your employer doesn’t give you benefits for long-term sick leave.

Of course, there are conditions and exclusions as with any insurance policy. But let’s take a look at the advantages and disadvantages of the cover.

Pros and cons of critical illness cover

Like any insurance cover, you will need to pay for it. So before you decide, we have outlined the pros and cons. If there’s a chance the policy won’t pay out, then it may not be worth paying a monthly fee.

Pros of critical illness cover

• Help with living costs: You may have a nest egg, but would it cover your monthly bills, such as food and energy costs?
• Covering outstanding loans: While you can take a holiday payment on loans or your mortgage, it is usually for only a short period. Also, a mortgage holiday can have its drawbacks. That’s something we’ve looked at previously, so check out our blog. A payout from critical illness cover could help replace lost earnings.
• A tax-free payout: When you receive your lump sum, the payment isn’t taxed.
• Adapt your home: Should the worst really happen, you may need to adapt your home to make living conditions easier. No building work is cheap and adaptions can be equally costly. A critical illness payout would help you make those changes.
  Children are covered: If you’re a parent most policies include cover for your children. Some cover children up to their 18th birthday, while others cover up to the age of 21 if they’re in full-time education.

Cons of critical illness cover

• Illness exclusions: Most major conditions are covered by critical illness insurance, but some aren’t. Check and understand what is excluded so you don’t get a surprise if you need to make a claim.
• Pre-existing conditions: If you’ve already been treated for cancer, it might mean you can’t get cover for that type or other cancers. At best, you might have to pay higher premiums.
• Expensive premiums: Some cover is more expensive depending on your personal circumstances. So if you’re older, smoke or have poor health, it could be costly.
  No cash value when policies end: Policies only pay out if you’re diagnosed with certain illnesses during the lifetime of the policy. If you die, the policy will end and won’t pay out to your family.

What else do you need to know?

Like any insurance, make sure you fully understand what you are covered for. More importantly, check what you aren’t covered for.

The severity of the illness could depend on whether you receive a payment if you claim, so read the small print.

And speak to your employer as they may have cover in your benefits package. It will save you paying a monthly sum.

If you need any further information, then contact our experienced team today.

As with all insurance policies, conditions and exclusions will apply.