Critical Illness Insurance: Everything you need to know

Everyone wants to feel financially secure, even if diagnosed with a serious illness. If you are diagnosed with a critical illness, Critical Illness Insurance can reduce your financial impact on your family. A critical illness can strike at any age and change lives.

The importance of Critical Illness Insurance

It’s easy to talk about the importance of life insurance, but people forget what would happen if they were diagnosed with a serious illness.  The sad reality is that 1 in 2 people will get cancer. Every 7 minutes, someone has a heart attack, and every 12 minutes, someone has a stroke. [1]

Recovery should be your priority

Access to the right amount of money can help ease financial stress when struck with a critical illness such as the above. If the worst ever happened to you or a loved one, it is important to concentrate on recovery and not worry about finances. That is where a critical illness policy can help. A critical illness can profoundly impact your daily life and is especially scary when you need to support a family. People in such a situation may be lucky enough to have savings to help make up the income gap. While some may rely on a benefits package that covers employment. Although, critical illness cover is usually your safest option.

Reduce the financial impact

Although it’s easy to believe “I’d handle that”, most people know someone who hasn’t. Anyone can get sick at any time. With the right critical illness coverage, you have peace of mind that you will have financial security during an unthinkably difficult time.

If you have to stop working to recover, or if your death occurs during the policy term, the money can be used to pay the mortgage, rent, daily bills, or simple expenses like the weekly food shop. This will give you and your family some financial security when needed.

Prepare for the worst-case scenario

Patients may not return to work immediately (or ever) after surviving a critical illness. They may also need home care and private therapy. It’s sad to think about surviving a serious illness but still being unable to survive the financial hardship.

While it isn’t something we want to think of while feeling healthy, we sadly never know what the future will bring. You can get critical illness coverage, whether on its own or as part of a life insurance policy. It will pay you a lump sum tax-free for certain life-threatening and debilitating conditions, such as a heart attack, stroke, certain stages/types of cancer, multiple sclerosis, or a stroke.

The emotional stress that follows a critical illness

An even more comprehensive policy will protect you against many serious conditions, such as permanent hearing loss, loss of sight, or a total and permanent disability that prevents you from working.

Some policies cover loss or partial paralysis. However, not all situations are covered. This is why it is important to seek professional financial advice to ensure your policy meets all your personal requirements. If you’re single and have no dependents, you can use critical illness coverage to pay your mortgage. This means you will have fewer bills and a lump sum to cover if you become unwell. If you’re part of a couple, critical illness cover can be used to provide financial support during times of emotional despair.

Combining both life and critical illness cover

The policy will detail the covered illnesses and any exclusions or limitations. These may vary between insurers. Most critical illness policies only pay once, so they cannot replace income but provide a one-off relief. This is why some policies provide both critical illness and life insurance. These policies provide a monthly payment if you cannot work because you are ill or injured. Typically, it will pay out until you can start working again, or until you retire, die or at the end of the policy term, whichever is sooner.

You might lose some benefits if your critical illness policy has expired. You should seek professional advice before you replace or switch your policy. A new policy might not cover pre-existing conditions.

When should you increase your coverage?

You may increase your coverage with some policies, especially if you have made major lifestyle changes, such as marriage, moving house, or having children. If you cannot do so under your current policy, you can always take out a new policy that acts as a ‘top up’ for your current cover. Only conditions specified in the policy document will be covered by a policy. To be covered for a condition, you must fulfil the policy definition. If your condition is considered too severe, it may mean that certain conditions, like some types of cancer, will not be covered. If you are diagnosed with certain conditions after a certain age, they may also not be covered. For example, if you are diagnosed with Alzheimer’s after 60, most policies do not cover it.

Survival period

Most policies will not pay out on a diagnosis but after what they call a ‘survival period’. The policy will not pay out if you die during this time, even if your critical illness is covered.

The policy usually includes permanent total disability. Some insurance companies define permanent total disability as being unable to work due to illness, while others consider it an inability to perform independent activities of daily living due to sickness or an accident.

Daily Living Activities include:

  • Washing
  • Dressing
  • Feeding yourself
  • Transferring from bed to chair.

The amount you pay for critical illness coverage depends on many factors. These include the type of policy you choose, your age, how much you want the policy payout to, and whether you smoke.

Medical advances have allowed more people to survive conditions that could have been fatal in the past. You can either use your critical illness coverage to help you live a more stress-free life while you heal from an illness or to pay for other purposes. Contact us to discuss your concerns or learn more about Critical Illness Insurance.


Ross Whatnall

Ross Whatnall is CEO and co-founder of GSB and a highly experienced private client director. Ross holds many insurance and investment management qualifications, including CISI, CII, LIBF and CFA. He started his career in private banking with HSBC in the UK before moving to the UAE in 2013 to focus on serving his private clients.

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