Critical Illness Cover

Have you considered how you’d manage financially if you were to be diagnosed with a serious illness? You may be faced with an expensive treatment, need a considerable amount of time off work and maybe even have to make changes to your home as a result of your condition. This is when critical illness insurance can help lessen the financial impact, providing a buffer to cover major expenses, including your mortgage.

Critical illness insurance can be complex and you may have felt too overwhelmed to look into it until now. That’s what we’re here for. At Trinity Finance, we make it easy to understand and arrange your critical illness cover. Our mortgage and protection consultants are experts in this field and are ready to find the right critical illness cover to meet your needs and give you peace of mind.

What is critical illness insurance?

Critical illness insurance provides financial protection should you be diagnosed with a serious illness during the policy term. As long as the illness is one of the specific ones detailed in your policy, a tax-free lump sum is paid to you by the insurance provider after diagnosis. This helps to ease any financial worries you may experience as a result, such as a loss of earnings. You can use the funds however you wish, whether that’s to make your mortgage repayments, cover your monthly bills and other living expenses, pay for costs related to your health or possibly to adapt your home if needed, such as creating wheelchair access.

How does critical illness insurance work?

Critical illness cover usually goes hand in hand with life insurance. It’s often combined with a life insurance policy but you can have it as additional cover or a standalone policy if you prefer. Just like life insurance, you decide the amount of cover you require and the length of the policy term. Unlike life insurance – when a lump sum is paid to your loved ones in the event of your death – a lump sum is paid to you after diagnosis of one of the serious illnesses covered by your critical illness policy. Once a payout has been made, your cover ends. Some policies also include cover for your children at no extra cost to you. The payout in the event that one of your children is diagnosed with a serious illness is typically a set amount or percentage of your cover amount. In this case, a payout is made by the insurer and your cover remains in place.

Cover amount

When trying to work out the amount of cover you require, think about what you would need to live on if you were no longer able to work as the result of a serious illness. Include large debts, such as your mortgage and any other loan, your credit cards, monthly bills and normal living costs. If you have children, don’t forget to include the cost of their education as well as childcare costs. Consider health-related costs too, such as expensive medical treatment.

Eligibility criteria

The eligibility criteria for critical illness insurance vary between providers but you usually need to be aged 18 or over and a UK resident. Some insurance providers have a maximum age limit and some insist that you have the policy for a minimum term, such as 2 years. You need to answer questions about your lifestyle and medical history, including whether or not you have any pre-existing conditions. Whilst some insurance providers won’t provide cover for a pre-existing medical condition, others will and our protection consultants will search for the right cover for you with one of those providers.

Additional cover, combined cover or joint cover

Additional cover means that separate critical illness cover is added to your life insurance policy. Should you be diagnosed with a serious illness, a payout is made to you by the insurer and if you then pass away during the policy term, another payout is made to your loved ones. With a combined policy, however, only one payout is made. This is either when you’ve been diagnosed with a critical illness or in the event of your death.

Joint cover is for two people and is a good idea for couples as it’s usually cheaper than having individual policies. Generally, only one payout is made with a joint policy and the cover then stops. This means if you have to make a claim for a critical illness diagnosis, your partner won’t be able to claim in the future should they be diagnosed with a serious illness too. If you take out a joint policy and later have to split from your partner, you are usually both provided with separate policies without having to answer new questions relating to your lifestyle and health.

What does critical illness insurance cover?

The types of conditions that are covered by critical illness insurance differ between providers. The main ones tend to be:

• Heart attacks
• Strokes
• Cancer
• Parkinson’s disease
• Multiple sclerosis
• Organ failure
• Severe head injuries
• Alzheimer’s disease
• A loss of limbs

Many other conditions can be included and some providers offer cover for over 50 serious illnesses. As well as the types of conditions covered by providers, the severity of them is also usually taken into account. For some illnesses, for example, you may not be able to claim unless you have permanent symptoms. Non-invasive cancers are unlikely to be covered and you may not be covered for hereditary diseases either. It’s essential to check the policy details carefully before proceeding so that you are fully aware of the cover available.

Types of critical illness cover

We’ve detailed the main types of critical illness cover you can choose from below.

• Level cover: With this type of critical illness insurance, the cover amount you choose stays the same throughout your policy term. This means the same amount is paid out regardless of when you may need to make a claim. Your premiums also stay at fixed amounts until the end of your policy so you know exactly how much to budget for.
• Increasing cover: To ensure the value of the lump sum paid out is reflected in real terms, your cover amount and premiums increase during the policy term to keep in line with inflation.
• Decreasing cover: You may just be concerned about ensuring your mortgage payments can be met or those for other loans or debts you have. In this case, decreasing cover reduces the cover amount during the policy term as your debt decreases. Your premiums remain the same throughout the term but this type of cover is usually cheaper than level cover.

How much does critical illness insurance cost?

The premiums for critical illness insurance are calculated on a personal basis depending on numerous factors. These include your age, gender, occupation, health, lifestyle, the level of cover you require, how long you want the policy to run for, your family’s medical history and whether you have any pre-existing medical conditions.

• Age: The older you are, the higher the premiums are as there’s an increased risk of your susceptibility to illness.
• Gender: Men tend to make claims on their critical illness policies more than women do so premiums for men may be slightly higher.
• Occupation: If your job is a high-risk one, your premiums will also be higher.
• Health and lifestyle: If you’re in good health, this lowers the premiums but if you have a lifestyle that’s considered to be risky – for example, if you smoke or take part in hazardous activities – this increases them.
• Cover amount and length of policy: The longer you want your policy to remain in place and the more extensive the cover, the higher your premiums will be.
• Medical history and pre-existing conditions: When applying for critical illness insurance, you need to provide details of your medical history and disclose information relating to any pre-existing conditions. Depending on the provider, medical conditions that you’ve already received treatment for or that are reflected in your family’s medical history may increase your premiums. These medical conditions may also be excluded from your policy so that you are not covered for them or there may be stipulations that you need to adhere to if cover is provided for them.

At Trinity Finance, our mortgage and protection consultants – located throughout Kent, London and Edinburgh – are highly experienced in dealing with critical illness insurance. They can explain the different types of cover available in a straightforward manner and help you ascertain how much cover you need as well as how long to have a policy in place. As mentioned earlier, should you have a pre-existing condition, they can ensure you’re covered and are aware of any stipulations relating to that condition in your policy. Just give us a call on 01322 907 000 for expert advice on how critical illness insurance can help reduce the financial impact that being diagnosed with a serious illness can cause. Alternatively, send us an email at info@trinityfinance.co.uk or an enquiry via our contact form and one of our protection experts will get in touch with more information.

Do you need critical illness cover?

Whilst you can’t predict how your health will be affected in the future, you can ensure a financial safeguard is in place should you be diagnosed with a serious illness. Think about the impact on your life if you’re unable to work and the expenses that would need to be covered. You may be entitled to Statutory Sick Pay, which is approximately £100 per week but this is only paid for a limited time. Check with your employer as to whether you’re covered by a separate sick pay scheme.

You may have savings that you can use to replace your loss of income, in which case you may not need critical illness insurance. Also check whether you already have cover included with your mortgage or another policy, such as a life insurance policy. If you do decide to take out critical illness insurance, make sure you know exactly what you are and aren’t covered for so that the policy is the right one for you. Our mortgage and protection consultants will discuss the cover with you in detail and provide impartial advice on other types of protection available, such as income protection insurance and family income benefit, to ensure you make an informed decision and choose the best protection to meet your needs.

Are you taxed on the payment received for a critical illness claim?

The lump sum you receive after making a critical illness insurance claim isn’t categorised as income because you didn’t earn it. Therefore, no income tax is payable on it. If you surrender your policy, however, and the cash surrender value is higher than the amount you’ve paid in premiums, tax becomes payable on the difference.

The lump sum paid out by the provider following a claim may be subject to inheritance tax. If you decided to take out both life and critical illness cover and made a claim but passed away before the payment was made by the provider, the funds then become part of your estate. Should your estate be valued higher than £325,000, the insurance payout will be subject to inheritance tax and this will fall on your beneficiaries to pay. To prevent this from happening, write your life insurance and critical illness policy in trust. That way, it falls outside of your estate and is exempt from inheritance tax. Speak with one of our qualified protection consultants on 01322 907 000 to discuss the tax implications relating to your life insurance and critical illness cover and benefit from expert estate planning advice.

Considerations when buying critical illness insurance

Before taking out a critical illness policy, there are a few things to consider. Make sure you know exactly how much is to be paid out should you make a claim — you can only make one claim and then your policy ends. Although the lump sum you receive may be substantial, you need to ensure it covers all of your expenses if you’re out of work for a prolonged period. Compare other forms of financial protection, such as income protection insurance, to understand the differences between them and to be sure that critical illness insurance is the right choice.

As mentioned earlier, be fully aware of the conditions covered by your policy and any restrictions on making a claim, such as the severity of the illness, having permanent symptoms or suffering from total disability. This includes checking that any pre-existing medical conditions are covered. It’s essential to disclose all of your medical history as well as that of your family when you apply for critical illness insurance — if you fail to do so, you risk not receiving a payout from the insurer in the event of a claim.

To benefit from lower premiums, change some of your lifestyle habits to healthier ones, such as giving up smoking, having a healthy diet and taking regular exercise. Consider taking out your critical illness insurance policy with a life insurance policy as this is cheaper than arranging them separately. If it suits your needs, decreasing cover is usually more affordable than level cover.

Can you cancel your critical illness policy?

Most providers give you a window, such as 30 days, within which you can cancel your policy and be issued with a refund as long as you haven’t made a claim. After this time, you can usually still cancel your policy but won’t receive a refund for any premiums you’ve paid. Rather than just cancelling your policy, though, speak with one of our mortgage and protection advisers first. The level of cover provided can usually be adjusted, whether you wish to increase the cover, extend the policy term or remove items from the policy.

Protect yourself financially with critical illness insurance

It’s hard to think about the possibility of having a serious illness in the future but it’s better to be financially protected just in case. At Trinity Finance, we make sure you fully understand the cover available with critical illness insurance and tailor a policy to meet your needs and affordability.

Before proceeding with a policy, our mortgage and protection consultants – located in Kent, London and Edinburgh – are on hand to discuss the other types of financial protection available, such as income protection and family income benefit. They can help you compare them to find the best fit for your circumstances.

Simply give us a call on 01322 907 000 to speak with an expert and benefit from a tailored financial solution. If you prefer, send us an email at info@trinityfinance.co.uk or an enquiry via our contact form and we’ll provide you with more information before searching for the best critical illness insurance to suit your requirements.