Critical Illness Protection

More people could face financial hardship despite medical advances 
Most homebuyers purchase life assurance when they arrange a mortgage, but only a minority obtain another form of financial protection that they are five times more likely to need before they reach retirement.

Although we’re four times more likely to claim on a critical illness policy than a life insurance policy before the age of 65[1], fewer than one in ten (8%) of us have critical illness insurance, and only a third (33%) have life cover, according to Scottish Widows[2].

Common diagnoses
The statistics are startling. Prostate cancer is the most common cause of cancer in men in the UK, with around 130 being diagnosed every day and one in eight having this type of cancer during their lifetime[3]. And ovarian cancer is the sixth most common cancer in females in the UK, with around 20 women being diagnosed every day.

In the meantime, 16,000 people each year are diagnosed with a brain tumour, and more children and adults under 40 die of a brain tumour than from any other cancer[4].

Scottish Widows paid out more than £5.5million in critical illness claims relating to prostate cancer, ovarian cancer and brain tumours in 2014[5], which collectively accounted for more than 10% of all cancer claims that year.

Decreasing priority
While medical advances mean that more people are surviving conditions that might have caused death in earlier generations, financial protection is becoming a decreasing priority for most of us. The research reveals that 80% of us consider broadband as essential for daily living, while 71% can’t get by without a mobile phone. In contrast, only 28% of us feel that protecting our families in case we become critically ill or unable to work is a necessity.

Most home buyers purchase life assurance when they arrange a mortgage, but many overlook another form of financial protection that they are potentially more likely to need prior to retirement.

Critical illness cover, also known as critical illness insurance, covers specified serious illnesses and provides a tax-free ‘lump sum’ – a one-off payment that could be used to help pay for your mortgage, liabilities or alterations to your home such as wheelchair access should you need it, but ultimately it’s your choice how you use it.

Specified medical conditions

Critical illness insurance will pay out if you are diagnosed as suffering from one of the specified medical conditions or injuries listed in the policy. But you need to be aware that not all conditions are covered, and the policy will also state how serious the condition must be. Conditions covered could include heart attack, stroke, certain types and stages of cancer, and conditions such as multiple sclerosis.
Some policies may also include permanent disabilities as a result of injury or illness. Some policies may make a smaller payment for less severe conditions, or if one of your children has one of the specified conditions.

Major financial commitments

People typically purchase critical illness cover when they take on a major financial commitment, and it also pays to start young when premiums should be relatively cheap, rather than leaving it until later in life when the price of cover can start to rise substantially.
You might already have some cover included in other products or work benefits. However, if you don’t, State benefits might not be enough to replace your income if something goes wrong. In this eventuality, critical illness cover should be considered if you don’t have sufficient savings to tide you over if you become seriously ill or disabled, or you don’t have an employee benefits package to cover a longer time off work due to sickness.

[1] ONS
[2] Scottish Widows Protection Report 2015
[3] Cancer Research UK
[4] Brain Tumour Research
[5] Based on Scottish Widows and Clerical Medical claims


Income protection

If you are unable to work due to a long-term illness or injury, income protection cover will pay a percentage of your salary each month. This can be used for a numerous of reasons including rent/mortgage purposes or other mandatory bills, coving costs that would be affected due to time off work. Payments will continue until the policy expires.

It is important to consider picking the right type of cover to match your personal circumstance and requirements. This is usually best explained by a professional financial adviser who can help you in the decision process and explain what each policy entails.

Income protection does five main things;

  • Replaces PART of your income
  • Payout until you can start working again (or unless you retire, die or the policy term ends)
  • There is often a waiting period before the payments commence
  • It will cover most illnesses that mean you are unable to work
  • You can claim as many times are required (only whilst the policy lasts)

For more information regarding income protection, feel free to check citizens advice here or contact a financial adviser.

*Please note that the information provided on the citizens advice link relates to Scottish Law and may vary in different parts of the UK.


Life Insurance

It’s a subject that no-one likes to think about let alone discuss but what provision do you have in place for your family in the event of your death?

A life insurance policy is an insurance contract. In exchange for regular premiums, the contract offers to pay an agreed lump sum of money on joint life policies if one of the lives covered dies during the term of the policy.

Generally, the younger and healthier you are the cheaper this type of insurance is and when your family is young this insurance can give you the “biggest bang for your buck”.

You may already have a plan that covers the outstanding mortgage on your home but what about not only the day to day costs but the future costs your family might encounter – university, weddings and help getting children on the property ladder.

Some of the things that you might like to consider are “how much cover do I think you need” and “how long do you need the cover for”? As with any other financial decision you make, the product has to fit your needs.

What is Term Life Insurance and what does it mean?

  • You have to die for it to be paid out
    • It only covers a set period of time at the end of which it expires

If the person or persons insured live longer than the term of the insurance policy then no cash value is payable under a term life insurance plan. Level term life insurance provides cover of a set amount of cover for a set period of time.

There are different types of life insurance, level (premium and cover remain the same), increasing (premium and cover increase in line with the contract) and decreasing (cover decrease and the premium generally remains the same).

The type, amount and term of cover required are always going to depend on an individual’s circumstances. Essentially, you need to work out the financial impact to your family in the event of your death, and how much money they would need to survive.

You can add critical illness cover for an extra cost when you take out your policy. It could pay out a cash lump sum if you are diagnosed with one of the specified critical illnesses that your plan covers during the length of the policy, such as heart attack, cancer or stroke. You can also add Terminal Illness cover, again for an additional cost, which pays out a cash sum if you are diagnosed with a terminal illness from which you are expected to die within 12 months of the diagnosis.