Critical Illness Cover

Introduction
Have you considered how you would look after yourself or your family if you were unable to work due to illness?  We are far more likely today to survive illnesses that may have killed us a generation ago.  While medical advancements have boosted our chances of recovering from a serious illness, sometimes illness can still mean that our lifestyle or way of working has to change.

Ironically, given that life-threatening diseases like typhoid and dysentery have been beaten, we are faced with critical illnesses which can sometimes be attributed to the stressful lives many of us live, especially when we drink, smoke or fail to exercise. 
The most common illnesses today are heart disease, stroke and cancer.

One way of ensuring we are secure financially should we fall victim to a serious illness is to take out critical illness insurance.
The statistics speak for themselves:
* Every year, around 300,000 people have heart attacks.  For 150,000 people it is their first.  Half of all heart attacks are fatal
* One in three people in Britain will have a cancer diagnosed at some time during their life
* Of those women who are diagnosed with breast cancer, 62% survive five years or more.

Critical finances:

Even if you do recover from your illness, while you are ill or recuperating the need to cover bills and look after the family are worries you do not need.  You may go back to work sooner rather than later, or you may have to change your career to one less

demanding.  Just think of the bills you will still have to meet, even if you are not working. These will include:

* The mortgage                       * Gas, electricity and phone bills
* School fees                          * The weekly food bill

You may continue to receive your salary from your employer, but this will not continue indefinitely.  Also, state benefits may not meet the level of salary you were receiving.

Then there are extra costs, which you may not have budgeted for.  You may also need to make adjustments to your home, for example, installing a chair lift or moving a bathroom downstairs.  You may need to pay for help in the home.  All this costs money you may not have spare from your income.  The last thing you want to have to do is to use your hard earned savings to supplement your income, when you had been planning to use them to go on that dream holiday, or pay for your child’s wedding.

Who should buy critical illness?
You should consider critical illness cover whatever your situation.  If you are single, without dependants you may feel cover is unnecessary, however in a way it is more important to you than life assurance.  If you become seriously ill, who will support you? Life assurance, as we have discussed, is only of use to dependants when you die.

If you are the family breadwinner, you will need to make some provision to feed, clothe and house your family if you are unable to work.  It is an irony that you’re surviving a serious illness may put them in a worse position financially than if you were not to survive.

Even if there is more than one income coming into your household, your lifestyle will reflect those incomes and will be affected if one income were to disappear or reduce.

How critical illness works:
A critical illness policy is an insurance policy which pays out a tax-free lump sum on diagnosis of a serious illness.  The lump sum you receive is for you to use as you wish.  Some policies will pay out an income instead of a lump sum.

All you need do is decide on the lump sum you are likely to need.  Sometimes this is easy to work out because you are using the critical illness policy to cover a particular liability, for example, your mortgage.

You may have life assurance attached to your mortgage; however this will only pay out if you die.  If you survive, you still have your monthly mortgage payments to contend with.  Critical illness will pay out to you when you are alive and need the money.

Critical illnesses covered:
Most critical illness policies will cover the most common critical illnesses:  Heart Attack, Cancer, Stroke, Kidney Failure, Major Organ Transplant, Coronary Artery By-Pass and Permanent Total Disability.  Other illnesses that most policies will also cover include:  AIDS and HIV, Alzheimer’s disease, Benign Brain Tumour, Coma Cover for Children, Cruetzfeld Jacob Disease (CJD), Loss of Limb, Sight, Speech, Hearing, Multiple Sclerosis, Paralysis, Parkinson’s disease, and Motor Neurone Disease.

You will need to check the small print of any policy you take out.  For example, AIDS and HIV are often covered in certain circumstances only, for example, if you contracted it through your work.

Permanent Total Disability is intended as a cover-all clause, provided your disability is permanent.  However, providers of critical illness policies have three definitions to choose from:

* Inability to do any occupation     
* Inability to perform your own occupation
* Inability to do your own occupation, or any occupation to which you are suited, with your education and training taken into account.

Some policies will only pay out if you cannot perform any part of your occupation, whilst others will only allow a claim if you can manage no part of your occupation.

Flexible Cover
Critical illness policies have developed over the years and can be applied in various ways:

Term insurance linked:  the cheapest way of obtaining critical illness cover - protection is for a set number of years only.  For example: 25 years to cover a typical mortgage term.

Decreasing term insurance:  critical illness can also be arranged on a decreasing term basis, ideal for covering debts that decrease over time, for example, a repayment mortgage.

If you think that your critical insurance premiums could be the equivalent of the amount spent on a meal once a month, it makes sense to secure yours and your family’s finances. You and your family will have lots to think about should you become ill - don’t let money be one of them.

Level Term Insurance

You may choose to have either a single life or joint life plan.  Depending on the number of lives the sum assured will be paid out if:

For a single-life plan
* You die before the end of the plan term, or
* In some cases you develop a terminal illness at least eighteen months before the end of the plan term.

For a joint-life plan
* Either of you dies before the end of the plan term, or
* In some cases either of you develops a terminal illness at least eighteen months before the end of the plan term.

The sum assured remains constant for the plan term.

If at the end of the plan term the sum assured has not become payable, the plan ends and nothing is paid out.

WHAT COUNTS AS A TERMINAL ILLNESS WHERE THIS IS INCLUDED WITH THE PLAN?

* It is an illness that is expected to cause death within 12 months
* You need to advise the insurer about it at least 18 months before the end of the plan term
* You must be resident in the UK or certain other countries

Buildings & Contents Insurance

The examples quoted below are examples from the range of policies available from the majority of insurers offering Buildings and Contents insurance cover.

Buildings insurance may cover:
* The structure of your home and walls, gates, fences, hedges, footpaths, etc.
* Outbuildings such as garages and sheds
* All permanent fixtures and fittings such as kitchen units, fitted wardrobes and wallpaper
All of the above will be covered against fire, storm and flood (except hedges, gates and fences), theft, vandalism, escape of water and subsidence.

You can also cover:
* Accidental damage to underground pipes and cables e.g. pipes freezing
* Accidental breakage to fixed glass and bathroom ware
* Cost of alternative accommodation for you, your family and pets during necessary repairs to your home following an insured event.

Additional Cover Option - Accidental Damage
When added to your buildings insurance, it covers accidental damage to your home such as putting your foot through the roof, spilling paint down the side of an external wall or damaging pipes or cables whilst hammering a nail into a wall.

Contents Insurance can cover on a 'new for old' basis:
* All household goods including all non-permanent fixtures and fittings e.g. carpets and curtains (but excluding clothing and linen)
* Personal belongings in the home e.g. cameras, bags and glasses
* Cash in your home (up to £300)
All of the above are covered against theft, vandalism, fire, storm and flood.

You can also cover:
* Accidental damage to TVs, VCRs, stereo equipment and home computers
* Freezer contents (up to £250)
* Contents temporarily removed from your home e.g. to a caravan or holiday home, this includes your children's belongings
  Whilst at university or college (up to £5,000)
* Cost of replacing external door locks if keys are stolen (up to £500)
* Contents in the garden (up to £500)
You can also get extra cover over Christmas and 4 weeks before and after your wedding.