Critical Illness Insurance

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Critical illness insurance helps protect against the financial impact that a serious illness could have on you and your family. 

How does critical illness insurance work?

Critical illness cover pays out on diagnosis of one of the serious illnesses covered by the plan. You usually have to survive for at least ten days following the diagnosis.

You can choose the amount you are covered for and whether you want a level, decreasing, or increasing amount of cover.

Level cover means the amount you are covered for doesn’t change, and a successful claim will result in that amount being paid out as long as the policy is still active. You might be 35 and choose to be covered for £100,000 until age 70. Whether you are diagnosed at age 40 or age 60, £100,000 will be paid.

Decreasing cover is generally used in line with a repayment mortgage as the amount you need to pay the mortgage off decreases with each payment you make. As the amount paid on a claim reduces over time, and eventually dwindles to nothing right at the end, it is typically a cheaper option than level cover.

Increasing cover looks to combat inflation by adding a bit to the amount you are covered for each year. Your premium will go up as well to reflect that. It’s often used to protect your family and to cover a Help to Buy equity loan.

Often the money is paid as a lump sum but there is a special form of cover known as family income benefit that will look to pay it on a monthly basis instead.

What illnesses would I be covered for?

That depends on which provider you take cover out with.

The main critical illnesses are cancer, heart attack, stroke, and MS. Most plans will also cover you for things like loss of a limb, organ failure, and neurological conditions like Parkinson’s and Alzheimer’s.

The key thing to remember is that each provider has a set definition of when the illness becomes critical. It has to meet this definition before you can make a successful claim. It can be worth paying a bit more to get cover with a provider that has more lenient definitions.

Some policies will provide you with an additional payment for less advanced cases. Your standard cover remains unaffected and should your condition worsen to such an extent that it meets the provider’s definition, you can still claim for the full cover amount.

If you have children, you can cover them on your plan too.

How much will it cost?

That depends on a number of factors, such as:

  • Age
  • Smoker status and health
  • Occupation
  • Height and weight
  • Medical history
  • How much you want to be covered for
  • How long you need to be covered for
Providers will charge different amounts based on their attitude to risk. An experienced insurance broker can help you get the right deal for your circumstances.

Is the money from critical illness insurance taxed?

If you pay the premiums from your own net income then any money received from a successful claim is not currently subject to income tax.

It will, however, form part of your estate for inheritance tax purposes. 

Please note that tax laws can change at any time.

How can The Mortgage Store Chorley help?

We understand the peace of mind provided by having the right policies in place. 

We’ll conduct a thorough review of any existing policies you have. If you’re employed, you might also have cover through work. Check with your employer to find out what you’re covered for and whether your family will benefit from it if you claim. If workplace cover doesn’t provide enough for your needs, a separate policy might be necessary.

Once we can see your current level of cover and understand what your priorities are, we’ll work with you to put an appropriate insurance plan in place.

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