Critical Illness

A Critical Illness plan is designed to pay out a lump sum if you are unfortunate enough to suffer from any of the specified critical illnesses but survive for a period of time after diagnosis (normally 28 days). The lump sum could be used to pay for things like nursing care, home-help, adapting your house to accommodate a disability; it could pay off your mortgage or give you a holiday to recover from treatment.

Critical illnesses usually include cancer, heart attack, kidney failure, multiple sclerosis, major organ transplant and strokes. These are known a core conditions and account for the majority of claims. The comprehensiveness of conditions covered varies enormously and details regarding what will and will not be covered will be fully explained in any supporting literature which you should check to ensure it meets your purposes.

Cover is provided over a specified term, at the end of which the contract ends and cover ceases. The amount of cover remains level throughout the selected term. Payment of the sum assured would be made on the diagnosis of a specified illness for the person insured.

As this type of contract only provides cover in the event of a critical illness there is no surrender value, so if you stop paying the premiums at any time, your cover will cease.

Premiums are based on your personal circumstances but the main areas for consideration by an insurer are your age and state of health. The older you are, the higher the premium will be. Similarly if you have or had a serious ailment the insurer may seek to charge you more or in some cases be unwilling to cover you at all. Higher levels of cover and longer policy terms all increase cast as will the fact that an individual smokes

It is usual to include cover for permanent total disability within the contract. The definition of Permanent Total Disability does vary and some insurers define it as the life assured being unable to follow his/her normal occupation as a result of sickness whilst others will define it as the life assured being unable to independently perform three or more Activities of Daily Living as a result of sickness or accident.

As it is a fixed term, there is no flexibility and you will be unable to increase cover or extend the term. Should you therefore find yourself ill at the end of the term you may be unable to obtain further cover.

There is no investment element to the policy, and your sum assured will take no account of inflation.

It is essential that you take professional advice prior to proceeding with any of the solutions outlined within the guides.

These guides do not provide individual tailored investment advice and are for guidance only. You should not act independently on the areas covered here but should seek professional independent financial advice. These guides represent our understanding of law and HM Revenue & Customs practice as at the date of publication. We cannot assume legal responsibility for any errors or omissions they might contain. Levels and bases of, and reliefs from taxation are currently those applying or proposed and are subject to change; their value depends on individual circumstances of the investor.