What is Critical Illness Insurance?

The insurance industry is full of jargon, so the following are some commonly used terms to describe the types of health insurance products that are available.

Whilst the Financial Services Authority (FSA) distinguish the various health insurance policies available between Pure Protection and General Insurance, the definitions used here are as those determined by the CII (Chartered Insurance Institute).

Critical Illness Cover (CIC) is a type of health insurance that pays out a lump sum in the event of the diagnosis of a specified illness or disability.

Why would I need Critical Illness Cover?

CIC should be considered for earners and non-earners who may at some time in the future find themselves in the potentially unfortunate position in being unable to earn or receive income from the household’s main earner due to illness or disability:

Generally CIC is a way of mitigating or reducing the financial effects of an adverse life event relating to you, your partner’s or family’s physical well being.  For example, the lump sum could be used to pay off a mortgage, assist with household expenditures, or pay for the mobility access of a wheelchair bound sufferer in the home.

Unlike Terminal Illness where death is certain, it is possible to recover from a critical illness.

How much will CIC pay me on a claim?

The purpose of CIC is to provide a lump sum amount on the diagnosis of a specified illness or disability. It is not related to income, but to the capital needs of you or your family and therefore technically any amount can be assured. However it is usually dependent upon the suitability and affordability to your personal circumstances.

How long will I continue to receive CIC payment?

After the lump sum assured or benefit is paid out, your CIC contract will cease and you will no longer be covered under the policy.

How do I pay for Critical Illness Cover?

Once the amount of benefit you require has been determined your monthly payment or premium for protection under the policy or cover will be offered to you by the insurer’s underwriter after they have reviewed a completed personal questionnaire relating to your occupation and lifestyle including in some cases a medical report.

The premiums may be guaranteed where the monthly payment and benefit is level, i.e. it does not change for the term of the policy, or may be reviewable every one, three, five or ten years depending on the insurance provider i.e. the insurance company underwriting the policy.

How should I apply for Critical Illness Cover?

The first and most important step after you have decided you may have a need for CIC cover is to have a discussion with us to provide you with independent financial advice.

Once we have agreed what the most suitable type of CIC cover is for your particular circumstances we make an application and complete an underwriting questionnaire on your behalf to take out a protection policy based on how much you can afford and the amount of cover required, for a length of time to match your needs.

Want to know more?

Talk to one of our qualified financial advisers on 01553 777600 or e-mail us at enquiries@ringassociates.co.uk

Also you may want to read the articles by accessing the following at the Directgov website http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/Insurance/index.htm

and the Financial Service Authority (FSA) consumer guide available on their website at http://www.moneymadeclear.fsa.gov.uk/news/product/critical_illness_cover.html