What is Critical Illness
Critical illness insurance is an insurance based product that most people do not take out or are unaware of. Most people take out Life insurance at certain points in their Life. These are trigger point are usually buying a house or having children. They understand the need for this type of insurance as they want to protect their families should they die. Thats great but what happens if they get critically ill, recover and are unable to work again.
A classic example of this is having a heart attack. With improvements in medical science a vast majority of people who have have a heart attack now survive, which again is great news but can leave people and their families in a difficult position if they are then unable to work. This could mean that the major bread winners income has disappeared. The main issue is generally how do we now pay the Mortgage?
If they had Critical Illness Insurance, on diagnosis of a Critical Illness they would be paid out a lump sum. The policies are normally written on a reducing term basis in line with their outstanding Mortgage balance. So for example, if someone had a Mortgage of £100,000 over 25 years the policy would be written on a £100,000 pay out reducing over the 25 years term of the Mortgage as their Mortgage balance reduces.
I used to believe wrongly that Critical Illness was a waste of money. We had Life insurance, endowment policies and Income protection what else did we need? Then in Dec 2007 my wife was diagnosed with Breast Cancer. The initial shock was devastating, we have a 2 year old son so our outlook on life changed overnight. Fortunately my wife has recovered and she will be fine but she now has to go back to work as we need her income to pay the mortgage. Her income protection will not pay out as she is technically fit to work. If we had taken our Financial advisers advice years ago we would have had Critical Illness cover and my wife’s policy would have paid out and wiped out our £93,000 mortgage. This would have dramatically changed our life as my wife would not have had to go back to work as our monthly outgoings would have dropped to a level where one wage would have been comfortable for us.
So what did I do?Straight away I got full Critical Illness cover for myself for the full amount of our outstanding Mortgage its obviously too late for my wife due to the Breast cancer. Now as I am a lot older than when our Financial adviser recommended the policy it has cost me a lot more and I am also a smoker so again the monthly premiums are more. My Premiums are £97 per month ( this also includes Life cover) and this covers our £93,000 mortgage. Note I have been a smoker so my premiums are quite high but I think its worth it.
Points to note.
When looking for critical Illness insurance always take advice from a Professional. The forms can be daunting as they ask a lot of questions. Be honest with the answers you give, the Insurance company will always look at your medical history if you make a claim and they will always be looking for a reason to not pay you out. If you have had a medical condition not matter how long ago make sure you declare this on the forms. Also if you smoke or have smoked or used tobacco products in the last 5 years say you are a smoker, your premiums will increase but you will be covered. Taking advice will also make sure that the Policy you take out is the most competitive on the market and the company that you are using has a good record on paying claims. All the major Insurance companies have a Critical Illness product so it can be a minefield thats why I recommend you talk to an adviser.
It can always be too late to get Critical Illness Insurance but never too early
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