Critical or Serious Illness insurance policies cover a range of specific serious illnesses. Should the worst happen, it provides a tax-free ‘lump sum’ – a one-off payment. This could help pay for your mortgage, debts, or pay for alterations to your home such as wheelchair access should you need it, but it’s your choice how you spend it.
Alternatively, an employer can cover an important employee whose absence could result in lost revenue or the need to recruit temporary/replacement staff.
What Conditions Are Covered by a Critical Illness Policy?
Generally, policyholders can choose between covering ‘Core’ conditions or to upgrade to include ‘Additional’ conditions as well.
The Core conditions are:
coronary artery by-pass surgery
major organ transplant
The Additional conditions are:
aorta graft surgery
benign brain tumour
heart valve replacement or repair
loss of limbs
loss of speech
motor neurone disease
third degree burns
(source: Association of British Insurers)
What Else Do I Need to Know About Critical Illness Cover?
On meeting a specified definition, the policy pays out a lump sum. Payment will be made on the specified condition, but if it’s not listed then no payment will be made. Please note that some conditions listed won’t pay out if the case is not deemed severe enough. For example, you could be ‘diagnosed’ with low grade prostate cancer, but unless the cancer meets a specific definition – usually to do with seriousness – it will not pay out.
You also need to know that once the lump sum is paid the policy will cease.
What If I Want to Insure More Conditions?
If you want to cover more conditions, you can consider ‘Serious Illness Cover’ by Vitality Life. This type of policy can cover over 170 conditions. The Vitality Life product will take into account the severity of a condition; the less serious the condition the lower the pay-out, however, a policyholder is more likely to receive a pay-out from a serious illness policy than they would from a critical illness policy, as more conditions are eligible for cover. Furthermore, because the pay-out is based around the severity of the condition, less serious conditions can still qualify for a pay-out albeit at a lower rate.
What Else Do I Need to Know About Serious Illness Cover?
While this type of product can pay out on more conditions, it is possible that you could get a lesser pay-out than you would with critical illness cover. For example, this could happen if someone was diagnosed with a cancer that is eligible for a pay-out even if the cancer is in its early stages and therefore easier to treat; in this type of case, a critical illness plan would pay 100% of the claim. A similar claim with a serious illness cover plan could result in only a 25% pay-out, as it would take into account the severity of the condition.
Serious illness plans don’t cease after the first claim; they will remain in force until the policy holder has claimed 100% of the insured sum.
What Should I Take Into Account When Deciding Between Critical Illness Cover & Serious Illness Cover?
Serious illness plans will cover you for more conditions and the severity of that condition will be taken into account effecting the pay-out. Critical Illness plans will pay out on fewer conditions but could pay out a higher sum as the severity isn’t taken into account.
Critical illness plans will cease after the first claim. Serious illness plans can continue to pay out (regardless of the number of claims made) until such time that 100% of the insured sum has been claimed. Serious Illness cover also gives you the ability to “top up” your cover back to the original sum assured after every claim without going through the underwriting process again.
Can I Get a Policy That Will Pay Out 100% of The Claim Like a Critical Illness Plan but Will Cover a Higher Number of Conditions Like a Serious Illness Plan?
Yes, Vitality Life offer something called a ‘booster’ which allows you to retain cover for a greater number of conditions but the policy would also pay out at 100% of the sum insured. This option creates a particularly high level of cover but, of course, this will have an effect on your monthly premiums.
Who can take out a Critical/Serious Illness Cover policy?
Frankly anyone who would like to protect themselves, their family or their business against serious illnesses.
Like a life insurance policy, a family could benefit from this type of pay-out to help them if a regular income is lost.
From a business perspective, it could receive a pay-out if a key member of staff was unable to work, enabling the company to cover the financial impact of such a loss. In this instance, a serious illness plan might be more appropriate, as the severity of the condition will most likely dictate the length an employee would be absent for, so the pay-out should probably reflect that.
All policies are subject to underwriting and factors, such as age, health and smoker status will determine the monthly premium to be paid and if terms can be accepted.