Just over 22% of the British population will suffer a serious illness before they reach retirement age. The financial pressures caused by the resulting loss of earnings can be extra stress in what is already a difficult time. Critical Illness Cover (CIC) is a form of insurance that is designed to help deal with your financial duties in just such a situation.
CIC policies cover for many of the major illnesses, though they vary a little from lender to lender. All policies will include: cancer, heart attacks, kidney failure, MS, strokes, organ transplants, and heart bypasses and will also pay out in the event of the policyholder suffering a permanent disability and possibly some other, less common illnesses.
That is not to say, however, that all conditions are covered. Most policies will not pay-out for tumours that have not yet invaded organ or tissue, and HIV/AIDS is also often not covered.
When you're looking for a policy its important to remember that even if a certain policy doesnt cover certain illnesses its not necessarily a bad policy. Theres little point taking out a policy that covers yellow fever, for example, as youre not that likely to contract it and youll just be paying more for the additional coverage.
Many people struggle to distinguish the difference between CIC and other forms of insurance, particularly Payment Protection Insurance and sometimes Life Insurance. CIC generally pays out one, large, lump sum to deal with the majority of pressing financial responsibilities, such as a mortgage, where as PPI tends to offer a small, recurring amount to help with day to day costs. If youre single and have no dependents, CIC is probably the way to go as it will cover all your costs immediately.
Of course, CIC is a good idea for anyone, particularly if they are the main earner in the household. There is also nothing to say that you cant have life insurance and CIC, and many lenders will probably try and sell you one when you take out the other. Although they do cover different eventualities, make sure you check the small print as theres little point paying for the same coverage on two different policies (for example, both life insurance and CIC may offer to pay off the mortgage).
In the last few years the cost of a CIC policy has gone up quite dramatically. As medical treatments and technology advance (and become more expensive) so to do the premiums. So if youre considering getting CIC its better to take out a policy sooner rather than later.
If you do take out a CIC policy, make sure you take one out that pays out relatively quickly after you are diagnosed with illness. Some policies have waiting periods that can stretch to as much as a year, and if you are ill, the sooner you can receive your money the better. For further advice, take a look at the website for the Association of British Insurers, this will give you the full list of illnesses that must be covered and some other pointers of what to look for.
Evon Zaharek has critical illness cover with Legal & General. Evon Zaharek has been writing about them since.