Critical Illness Cover
Types of critical illness cover
Like life insurance, Critical Illness Cover can be set up on many different options, and this is where the knowledge and advice of DJB Mortgages advisers can ensure you have the correct policy in place for your circumstances. Another major part about Critical Illness is that the policies can also contain an element of cover for your children up to a certain age, depending on the insurance provider.
Depending on the need for Critical Illness cover will play a huge factor in which type of policy will be best suited to your needs. Many insurance companies cover different elements within their policies and for this reason, DJB Mortgages will have an in-depth discussion around your needs and worries to make sure that you gain the correct policy with the correct provider.
Below are the different types of methods that life insurance can be structured;
Level cover - This provides a lump sum and will remain the same throughout the term of the policy. This is normally used to protect an 'INTEREST-ONLY MORTGAGE' or a 'FLEXIBLE MORTGAGE' that allows borrow back facilities.
Decreasing cover - This is often chosen to cover a 'REPAYMENT MORTGAGE'. The cover decreases over the policy term, broadly in line with the mortgage.
Increasing cover - This is designed to increase each year to help protect against the future effects of inflation. This type of policy would normally be put in place to protect family requirements rather than a mortgage.
Family income cover - This can provide a family with either monthly or yearly income instead of a lump sum payment.
What is critical illness cover?
Critical illness insurance will pay out if you get one of the specific medical conditions or injuries listed within the policy. that you have taken out. However, you need to be aware that not all conditions are covered and policy will also state how serious the condition must be.
Examples of critical illnesses that might be covered include:
> heart attack
> certain types and stages of cancer
> conditions such as multiple sclerosis.
Most policies will also consider permanent disabilities as a result of injury or illness.
Some policies will make a smaller payment for less severe conditions, or if one of your children has one of the specified conditions.
Do you need critical illness cover?
State benefits might not be enough to replace your income if something goes wrong and you can’t work because of long-term sickness or disability. If you’re eligible, Employment and Support Allowance ranges from around £70 to just over £100 a week, depending on your circumstances and the seriousness of your illness or disability.
You should look at getting critical illness cover if:
> you don’t have enough savings to tide you over if you become seriously ill or disabled
> you don’t have an employee benefits package to cover a longer time off work due to sickness.
You also need to consider the effects of the illness and how this would impact your life, and family around you. Critical illness shouldn't just be considered once you have a mortgage, you should consider this type of insurance at all times as this impacts your life not just a mortgage payment.
How much does it cost?
Your monthly payments will depend on a number of factors, including:
> the amount of cover you take out and for how long
> whether you smoke or have previously smoked
> health (your current health, your weight, your family medical history)
> job (some occupations carry a higher risk than others and might mean you have to pay more each month.
Should I Place It In Trust?
Most critical Illness policies also have free life insurance included at the same level of cover. It’s a sad fact that most people with life assurance in the UK do not have their policies written into trust.
Having your policy in trust ensures that the benefit is paid out exactly according to the wishes of the deceased. Furthermore, as a policy written in trust falls outside of the legal estate for tax purposes, it is not factored into the calculation of inheritance tax payable and lengthy probate does not need to be granted before the life company can payout. This means that your surviving spouse or children can quickly receive the much needed financial assistance in the event of death.
*For insurance business, we offer advice on products from a choice of insurers.
*Some trusts are not regulated by the Financial Advice Authority.
Trust Services Promoted here are not part of the Openwork offering and are offered in our own right. Openwork Limited accepts no responsibility for this aspect of our business.