Critical illness cover pays out a lump sum if you are diagnosed with a critical illness during the plan term that meets the policy definition. It only covers the critical illnesses defined in the policy and no others. They typically cover a range of illnesses such as heart attack, Alzheimers disease, strokes and different types of cancer, subject to them meeting the policy conditions.

The range covered will vary from company to company. If you want to be covered for more illnesses than on a standard policy then you may be able to do this, although there will usually be an extra cost.

If you are diagnosed with one of the illnesses specified in your policy during the plan term, you will receive a one-off lump sum free of personal liability to income tax and capital gains tax to use as you wish (tax rules may change in the future). On some policies, this is subject to a certain survival period. Please note, there is no cash-in value at any time.

You may be able to add critical illness insurance as an additional option to your level or decreasing term assurance or buy it as a separate product.

Pros

• Pays out a lump sum free of income tax and capital gains tax if you are diagnosed with a listed critical illness during the policy term.
• In most cases, it pays out regardless of your ability to work.
• It’s entirely up to you how you spend the money.
• You keep the money even if you make a full recovery.

Cons

• Not all critical illnesses will be covered and if you want others to be added, you’ll have to pay more or may not be able to get it added.
• If you’re diagnosed with a critical illness that isn’t specified on your policy list then you won’t get any payout.
• You will not be covered for an illness you already have.

If you’re worried about how you would cope financially if you were diagnosed with a critical illness, and are looking for cover that specifically pays out if you’re diagnosed with a specified illness or condition, then this could be the product for you.

You should make sure that any other policies you may have do not already provide you with sufficient protection in the event of critical illness.

Many people buy critical illness insurance when they take on a major commitment such as a mortgage. This may be something you can discuss with a mortgage adviser. If you want to research the market for yourself, take a look at insurance companies, banks, building societies and other financial companies. You can also usually buy direct through the internet or over the phone, or you can speak to a financial adviser.

Think about it – Make sure you’ve thought carefully about what you want and taken into consideration any cover you already have or cover you are entitled to from your employer. You don’t want to be paying for more cover than you need.

Check the small print – Make sure you understand what is and isn’t covered as these can vary from company to company.

Consider all your options – Ask what’s available and make sure you understand all the extra options.

Shop around – Different companies offer different levels of cover at different prices. Make sure you shop around and that the cover you choose is the most appropriate for your needs and circumstances.

If unsure, get advice – If you’re unsure of what to do next, speak to a financial adviser who will be able to help you make the right choice.