Critical illness cover

Discussion in 'Finance, Property, Law' started by Bowser-Mong, Jun 7, 2007.

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  1. Me and the missus have just taken out a new mortgage on our house. Now the question I want to know the answer to is this. Is critical illness cover worth anything other than the paper it is written on? We have got Life cover which decreases in line with our mortgage and a very reasonable 20 quid but if I take this other crap then it bumps the cost up big time. Any advice greatly appreciated.
  2. Cards on the table, I am an IFA based in Leicester; this is only general advice, not specifically geared to your circumstances and is worth precisely its cost to you.

    There are four common sorts of personal insurance that most people should consider taking out for the protection of themselves and their family; life cover, critical illness cover, income protection (also known as permanent health insurance); and accident, sickness and unemployment cover, (usually known as ASU).

    Life cover is generally what it says on the tin, if you die your family get the sum assured. It comes in various flavours, decreasing, level, guaranteed, index linked etc. The trick is picking the right one for you.

    Critical illness cover will pay out on diagnosis on one of a number of specific illnesses. These days, most company's cover follows the ABI Core or Core+ definitions that include many forms of cancer, heart attack, CJD and about 28 others, BUT it won't pay out if you die within 13-28 days of diagnosis, (depending on company), or if you don't get the right diseases. Core plus means more diseases covered, so in theory it is better. As a very rough approximation, you are 12 times more likely to get a serious disease than die before the age of 65, so for some this sort of cover is very attractive. Generally, Life and Critical illness cover is cheaper as a package than as standalone policies.

    Income protection provides replacement income, (about 60% of normal income), in the event you are unable to work on the grounds of ill health. Policies are normally written to retirement age and they will pay out until you return to work or retire, after issue of a doctor's sicknote and the completion of any deferred period, anything from a week to 12 months. The options can be complicated, so I will not try to summerise them here.

    ASU provides cover in the event of accident, sickness or unemployment and replaces income until you return to work or 12 months, whichever is the sooner. ASU can be used to cover the defered period of income protection.

    There has been a lot of fuss in the press about insurance providers not paying out on claims - generally these boil down to non-disclosure, (the policy holder did not tell the underwriters all of the relevant medical issues), or for critical illness, not getting the "right" disease. For ASU, it is less clear-cut, some ASU is very overpriced, poorly sold and the underwriters can get very picky - I find it hard to recommend, (but take your own advice). As an IFA, me and my employer have never had an issue with claims, the providers have always paid out, but we take a lot of trouble to explain everything to the client and complete the forms properly.

    If you are looking for anything other than vanilla-plain life cover, you probably need independent financial advice, it need not be expensive and if they co*k up you have someone to sue. Clicky to IFAs in your area.

    Remember, you set the budget, your IFA should give you options and costs and not bully you into cover you don't need or cannot afford. To give you an idea, I have life and critical illness for £250,000, but I don't have income protection or ASU; as a chronic asthmatic life and crit is more expensive, income protection far far too expensive and ASU pointless as it won't cover the chronic conditions or self-employment.

    (edited for fat fingyres)