Critical illness cover : all you need to know

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    What is Critical illness cover ?

    Critical illness cover (CIC) is a long-term insurance policy designed to pay a lump sum on the diagnosis of certain life-threatening or debilitating (but not necessarily fatal) conditions such as a heart attack, stroke, certain types/stages of cancer, multiple sclerosis and loss of limbs.

    The illnesses covered will be specified in the policy along with any exclusions and limitations – these differ between insurers. CIC policies usually only pay out once, so are not a replacement for income.

    Who is likely to buy it?

    Many people buy CIC when they take on a major commitment such as a mortgage. This is something you can discuss with a mortgage adviser.

    Otherwise, you can buy CIC:

    • through a financial adviser, who advises on CIC, taking account of your wider financial circumstances; or
    • directly from insurance companies.

    Not all firms will give you advice about whether CIC is suitable for you. They should tell you whether they will be offering advice and recommending a policy, or giving you information only. If they only give information, you will need to consider the information they give you and make your own decision as to whether the product is right for your needs, or seek independent financial advice.

    What are the main features?

    Before you take out cover, here are some things to consider:

    • Critical illness cover pays you a lump sum if you are diagnosed as suffering from one of the specified illnesses.
    • Policy summaries will often set out a list of illnesses covered, but this is only a guide and full details will be in the policy document. This will also set out the criteria that have to be met before the insurer will pay a claim, including defining the level of severity of the illness.
    • As an example, in the case of cancer, not all cancers or stages of cancer are covered. And for heart attacks, the insurer will need to have medical evidence of the severity of the condition before paying a claim. So make sure you check which illnesses are covered.
    • CIC does not cover simply any sickness that affects your ability to work – it is specific about which illnesses are covered.
    • Some insurers exclude all pre-existing conditions but others will decide on the basis of your personal medical history.
    • CIC differs to other types of protection insurance such as income protection or payment protection, so make sure you understand what it does and whether it is right for you.
    • Before you take out the cover, the firm should give you either a Policy Summary or Key Features document. This will set out the key features and benefits, as well as any significant or unusual exclusions or limitations. If you have any queries about these you should ask the salesperson to explain the cover in more detail. This will help you make an informed decision on whether to take out the cover.
    • Many insurers now provide a plain English guide to the illnesses covered. Ask the salesperson if they have one that explains the policy they have recommended.
    • If the insurer imposes any other conditions, perhaps because of your own or family medical history, you should be told what they are before you take out the policy.
    • Detailed policy terms and conditions will be provided in the policy document the insurer will send you after you take out the cover – make sure you read it so that you know what you’re covered for.

    If you’ve decided CIC is right for you

    • It’s essential that you give full, honest answers to questions you are asked about both your own and family medical history. Giving incomplete or wrong information could invalidate your policy and any claim you make on it.
    • If you are not sure, it is better to mention things. Otherwise you will not be aware of what the policy may or may not pay out until you make a claim.
    • Many insurers will allow you to send medical information directly to their Medical Officer, so if you do not want to discuss personal or sensitive information with the sales adviser, ask about this.
    • Bear in mind that the premium the salesperson quotes to you is only an estimate. The insurer will confirm the actual premium, and the terms, after it has considered your medical history.
    • Make sure you understand what the policy covers, when it will pay out and when it will not.
    • Read the documents you are given and ask questions if you don’t understand anything.
    • Remember CIC only pays a lump sum. If you want insurance to cover lost income or your mortgage repayments, ask about other types of insurance that might be more suitable for your circumstances.

    Questions / Answers :

    I already have CIC but want to change my mortgage and increase the cover. Should I cancel my existing policy and take out a new one?

    You might find that by replacing a policy you lose some of the benefits if you have developed any illnesses since you took out the first policy. Pre-existing conditions may not be covered under the new policy. You may be able to get cheaper cover if you switch to another company but the cover might not cover all of your needs.

    So think very carefully before you replace or switch your policy.

    Some policies allow you to increase your cover – particularly after lifestyle changes such as marriage, moving home or having children. Ask your insurance company or financial adviser for information.

    If you cannot increase the cover under your existing policy you could consider taking out a new policy just to ‘top up’ your existing cover.

    Can I cancel the policy if I change my mind or I’m not happy with cover it provides?

    You can cancel within 30 days of taking out the policy and get your money back – provided you have not made a claim. After that, you can still cancel the policy at any time under most contracts, but you may not be entitled to a refund of the premiums you have paid. Your cancellation rights should also be set out in the key policy information.