Whilst increasing in popularity in recent years, critical illness cover is an invaluable type of life insurance policy whose benefits are still relatively unknown to many.

If you’re diagnosed with an illness or sustain an injury covered by your policy, you’ll usually receive a one-off payment from your insurer. This settlement can really help you to overcome the physical and financial challenges that your new situation may have caused. For many this means being able to pay off unsecured and secured debts like credit cards, auto finance and mortgage/home loan: for others it could be income replacement/covering any loss of earnings, or making essential home improvements to make daily tasks or living easier (in the event of disability for example). Most importantly, for those with dependants such as a spouse and children, this policy can help to ease your family’s financial worries.

Do I need critical illness cover?

The big question to ask yourself is “what happens if I fall sick or get injured and can’t work? Do I have enough savings to pay for my general costs of living and financial commitments?” For most people, the answer is a straightforward “no”. And even if you do have savings, would they be enough if your illness or disability is long-term? Commitments like a mortgage or rent, financial commitments, day to day living expenses and dependents can soon deplete those savings leaving you vulnerable, especially if you are not in a position to resume employment.

The ultimate decision as to whether you need cover is yours is yours but it’s really important to consider how you can cover those essential costs as well as providing for your dependents who rely on you and your income. Whilst income protection insurance is also available in the market it’s often more costly than critical illness and doesn’t necessarily have all the same benefits.

Ok, so I need a policy but how much cover do I need?

This is something only you can decide as the level of cover is generally governed by your personal and financial circumstances. You should Include things such as affordability (put simply, what premium you can afford to pay), your outstanding mortgage (home loan) and any other outstanding finance amounts, and what financial and practical support your dependants would need if you no longer had an income.

How can I spend the money I receive if I claim?

The good news is there are no restrictions, meaning you’re free to spend the money however you choose, but typically claimants use the lump-sum settlement to pay for their medical care and necessary treatment, adaptation of their home to meet any changed needs, or cover monthly bills in the event they’re unable to work.

What if I never claim, can I get a refund?

No, like most insurances, your premiums paid are there to cover you in the event you may have needed to claim, so effectively cover you as a “risk” to the insurer. This means that even if you don’t claim, you are not entitled to a refund.

And, how many times can I claim? What if I develop multiple illnesses/conditions?

It’s important to note that a critical illness policy will only pay out once. Generally, Insurers specify all the critical conditions they cover, and their terms for you to be eligible to make a claim (for example, most illnesses have a severity condition clause. Most policies cover a wide range of “typical” critical illnesses (such as cancer, multiple sclerosis, heart attack/heart disease) but as with all insurances, it’s important to read the details. Illnesses covered can differ from insurer to insurer, so always check the product specifications policy documents carefully to ensure you know what’s covered and what’s not.

About Author

Rachel Al Mughairi

About Author

With over 34 years in the international insurance industry in a variety of senior management roles, and as holder of the Diploma in Insurance from the Chartered Insurance Institute, Rachel surely knows her insurance! With experience in London, continental Europe and the Middle East, Rachel is here to share her knowledge and help you understand more about insurance products in this easy-to-understand series of videos and blogs.