Life insurance is a basic insurance policy that pays out a lump sum in the event of the death of the policyholder Often this type of insurance is used to ensure that your family or dependants don’t suffer financially if you die.
When buying life insurance, extras are often offered as a form of more comprehensive cover at an additional cost, this includes critical illness insurance.
Critical illness insurance pays out a lump sum in the event of a stroke, heart attack, cancer or another specified life threatening, but not fatal, illness.
Often this type of cover is used by those who are worried about the financial pressure of paying off loans or mortgages if they are unable to continue to work.
In order to claim this tax free lump sum, normally you must survive at least one month after becoming critically ill.
Critical illness cover will pay out for a list of illness specified by the insurance company at specified severity.
Most insurance companies will now cover around 30 illnesses however this does differ from one company to the next.
Most insurers state you are unable to make a claim within the first 3 months of the policy and generally critical illness insurance will only pay out once; it is therefore not a replacement for income.
Critical illness insurance can be purchased either directly from an insurance company , through a financial advisor or insurance broker.
If you chose to buy directly from the insurance company it should be noted that not all firms give advice, they only offer information.
Before going down this route you should either: seek independant advice or check to see what other companies have to offer.
In order to take out critical illness cover you will have to complete a proposal form, you will also have to provide a medical history and should check if any family members have suffered from any major illnesses in the past.
If they have then your policy may be rated, which potentially means higher premiums or you may not get cover for certain conditions.
Additionally before being accepted you may need to have a medical, this may occur if you have any pre-existing medical conditions.
However this does not necessarily mean higher premiums.
If you are a smoker you will have to go for a medical and your premiums will also be higher.
Note – It is incredibly important that you are honest about both your personal and your family medical history.
In the event that you do make a claim, if your insurer finds any information that you failed to disclose then your claim could be rejected.
If you are not sure whether a piece of information is important when detailing you and your families medical history, include it anyway as it may affect any claim you make later on.
The most common problem many applicants will have when making a claim is that of non-disclosure.
When you make a claim your insurance providers will trawl through you medical history and if they find incorrect information, for example if you said you were a non-smoker when infact you were then your claim will be rejected.
Some policies will allow you to increase your cover, particularly after important lifestyle changes including having children, marriage or moving home.
However, if you are unable to increase your existing cover then it is possible to take out additional policies to add to your existing cover.
Before cancelling an old policy you should consider trying to increase the policy first as you may lose benefits from your existing plan; for example if you have developed any medical conditions since first taking it out.
A new policy, therefore, may not cover all your needs.
If you decide that you are no longer interested in taking a policy then most providers offer a 14 day cooling off period.
If you do change your mind within this time frame and inform your insurance provider immediately, then you should receive a full refund on your first payment.
Before taking out a policy you should know exactly what critical illnesses you are covered for and any criteria that effects making a claim against them.
Many life insurance providers now offer insurance for children; alternatively some providers automatically cover children within your own policy.
By comparing providers you will be able to find the best quote for you.
All customers should receive a key features document before they take out the policy and if any critical illnesses are being omitted due to pre-existing medical conditions, this should be detailed beforehand.