When you take out a mortgage, it is important to ensure that you will be able to pay the mortgage, even if you find yourself unable to work through illness. Most people, if they haven’t done so already, take out life insurance when they take out a mortgage so that the mortgage will be paid off in the event of their death. However, only a minority of people take out critical illness cover, which they are at least five times more likely to need before retirement than life insurance.
Due to medical advances, more and more people are surviving serious illnesses that would probably have been fatal a few decades ago. Critical illness cover pays out a large, tax free lump sum in the event that you are diagnosed with a serious illness such as a heart attack or cancer. This can give you a much-needed financial cushion at a time when you will most likely be unable to work.
Compared to many other types of insurance, critical illness cover is relatively inexpensive and straightforward. All you need to do is decide how much to insure yourself for, and this sum will be paid out upon diagnosis of one of the conditions that are listed in the policy. Most people choose to insure themselves for the outstanding balance on their mortgage, so that this major expense will be taken care of in the event of your illness.
The important thing to remember when buying critical illness cover is that it will only cover you for certain conditions, and these conditions need to be sufficiently severe to warrant a payout. Most policies are pretty clear about what these conditions are, and how bad they have to be. The majority of them exclude conditions that they do not deem to be life threatening, such as early stage cancer, although some will pay out a different percentage of the lump sum based on the severity of the condition.
Some will have renewable premiums, and some will have fixed premiums. Generally speaking, policies with a fixed premium are more expensive initially, but at least these give you an assurance that your premiums will not go up as the years go by, and will become cheaper in real terms due to the effects of inflation. You can get critical illness cover from most companies that offer life assurance, such as Legal & General, and some firms offer a combined life and critical illness policy for those who want to cover all the bases.
