What is critical illness cover?
Critical Illness cover is a protection policy which pays out a tax-free lump sum in the event of an individual suffering a life threatening illness.
Many people remain unaware of the existence of critical illness cover and wrongfully assume their life assurance policy provides the necessary benefits.
In reality, this is often not the case and having the wrong policy in place can cause heartache and major financial difficulties for a family.
Why is it so important?
What people don’t appreciate is the overwhelming number of individuals who suffer a critical illness pre-retirement.
Recent figures show that a male aged between 20 and 40 has a one in four chance of suffering a heart attack, cancer or a stroke prior to the age of 65 and this figure is one in five for women. The average age for a critical illness claim from a leading provider in the UK is just 48.
These statistics might come as a shock to most people, highlighting the importance of having adequate protection in place to allow an individual and their families to continue to enjoy life.
As a result of medical advances, people now are living much longer and are able to live many years after suffering what we term a critical illness. However, the financial burden this can have on an individual and their family is enormous and sometimes crippling unless the correct insurance policy is in place.
According to industry figures, 40 per cent of diagnosed cancer sufferers aged between 35 and 54 will survive at least three years, while 80 per cent of men and women aged between 45-65 will survive a heart attack and 50 per cent are still alive 10 years later.
Stroke is said to be the largest cause of severe disability, with 350,000 people affected at any one time. Nearly 70 per cent of stroke victims survive for at least 12 months, highlighting the importance of the right type of cover to ensure individuals have the funds available to them when it matters the most.
Who is most affected?
Those most affected financially tend to be those with young families to support and dependants who are reliant on them to provide financial security.
Also, those with mortgages or high earnings where the impact of being unable to work and suffering an illness is likely to have the biggest financial impact. Not only do they need to cover the cost of general outgoings such as mortgage, school fees, utility bills but also medical costs which can be significant.
How reliable are the providers?
The number of critical illnesses covered on a typical plan has increased dramatically with providers offering cover across 40- 50 different illnesses.
Not only this but the claims records of protection providers has dramatically improved with a leading provider paying out 92.3 per cent of all critical illness claims, totalling £153 million.
Where do you go from here?
Critical illness cover is part of the wider financial protection plan to provide people with peace of mind that, should they suffer an illness, they and their family would be financially protected.
This should not be seen as a replacement for life cover or income protection, which all play a role in ensuring financial well-being in the event of being unable to work as a result of accident, sickness or death.
It is important to seek financial advice to assist in the understanding of what level of protection is most suitable. Ludlow’s consultants will advise on a range of options to ensure that at least some of the worry caused by suffering such an illness is removed from the equation, and those affected can continue to enjoy life.