Taking out critical illness cover is a serious consideration for anyone who worries about how and their relatives might cope should they be suddenly taken ill. Life insurance is one thing to think about, but this generally on covers you in the actual event of death, so what would you do if you were to need expensive long term care, or simply couldn't return to work?
What exactly does it cover?
Critical illness cover is essentially an insurance policy, designed to payout a tax-free lump sum in the event that you are diagnosed with a medical illness or health condition during the term of the policy.
All policies must cover certain core conditions; cancer, heart attack and stroke. Further to that you have to sift through the multitude of policies on offer to find one that best suits your needs, as they can vary greatly as to what illnesses they cover for.
The most comprehensive (and therefore the most expensive) policies tend to cover for around 40-50 conditions, including things such as Alzheimer's, loss of limbs, MS and blindness.
As with any policy make sure you read the terms and conditions fully before jumping to a decision on which policy to go for.
Do I really need it?
Obviously the choice is yours alone, but there are a few things to consider. If you don't have significant savings or another contingency in place, you should bear in mind how difficult managing a critical illness can be without suitable financial backing.
There are many uses you could instantly put the lump sum towards which could lessen the burden for you. For example it could pay off your mortgage, replace lost earnings, or even pay for private medical care, or household modifications to make your life easier.
You shouldn't assume that you don't need cover if you have relatives or dependants who you believe can take care of you. The financial burden alone can be huge, as well as the emotional responsibility involved with helping you.
OK I'm convinced, what should I consider when buying?
Cost is going to be your initial concern. As with all insurance, cheapest is rarely the best, but you need to find a balance between what you can afford and what offers an acceptable level of cover.
You should also look closely at the list of illnesses covered in each policy and bear in mind that paying extra for rare or unusual conditions might not be worth the investment; essentially you want a wide spread of cover across the most common illnesses if possible.
A good place to start is to look for policies which offer 'ABI+' definitions. This means that the illness definitions described on the policy exceed those set out by the 'Association of British Insurers' (ABI)
Also keep an eye out for providers which try to sell total and permanent disability as an extra – you can often find this included as standard with other insurers.
Finally, if you have children you may consider having them added onto the policy to cover any critical illness they might suffer. For a small addition to the premium you could expect to receive between £15,000 - £25,000 if anything were to befall them.
If you're looking for further assurances for your dependents future you may also consider taking out income protection insurance and life insurance. Check out our associated guides for more details.