Critical illness insurance policies cover many health conditions and can vary in the cover they offer. Use these simple tables to check what features are a ‘must have’, a ‘should have’ or a ‘could have’ to make sure you buy the right policy for you.
‘Must have’ features
| ‘Must have’ features | A good policy will give |
|---|---|
| Critical illnesses covered – your policy should cover you for at least: cancer, heart attack, stroke, multiple sclerosis, benign brain tumour and coronary artery bypass, because these are the conditions which give rise to most claims. |
Cover for the illnesses listed, plus the remaining 23 critical illnesses defined by the Association of British Insurers, plus a number of others Conditions usually covered by critical illness cover are listed here. You are only covered for illnesses and procedures defined under the policy; simply being unable to work does not necessarily entitle you to claim. |
| Life insurance and critical illness – life insurance pays out if you die within the term of the policy. For a small additional premium, life insurance can be added to your critical illness policy. Or, critical illness can be offered as a benefit of your life insurance policy. |
A payout if you die or if you are diagnosed with an earlier critical illness |
| Terminal illness – if you are diagnosed with a terminal illness which means your life expectancy is no greater than 12 months your policy will pay out. |
A terminal illness payout at any time during the term of the policy Terminal illnesses diagnosed within the last few months of a policy (can be as much as 18 months) may not be covered. |
| Total and permanent disability – the policy pays out if you are totally and permanently disabled, regardless of the illness you are suffering from. |
A payout if you cannot do your own occupation Others might only pay out if you couldn’t do a suited job or you failed an ‘activities of daily living’ (ADL) test. |
| Guaranteed premium rates – premiums agreed at the beginning when you buy the policy will apply throughout the term of the policy and are not subject to review (unless you change the term of the policy or the benefits). |
A choice between guaranteed premiums and reviewable premiums (reviewable premiums could be suitable in some circumstances). |
| Children’s critical illness – the policy pays out if one of your dependent children is diagnosed with one of the critical illnesses covered by the policy. |
Cover for all of the critical illnesses included in the policy (although children are unlikely to contract some of these). Children may not be covered for all the illnesses in the policy or for congenital conditions. |
‘Should have’ features
| ‘Should have’ features | A good policy will give |
|---|---|
| Waiver of premium – if you are unable to work because of sickness or disability your premiums continue to be paid on your behalf. |
An automatic waiver of premium The definition of disability should be ‘own occupation’, meaning your premiums will be paid if you are unable to do your own job rather than any job. Being unable to work as a result of redundancy or unemployment is not covered. |
| Indexation – the facility to have your cover increase each year in line with an index (such as the retail price index) or a fixed percentage so that your payout maintains its buying power. |
The option to add indexation at any point during the contract |
| Cover for less severe illnesses (severity based critical illness cover) – partial payments are made if you get a less serious illness. |
This cover should be included in a good policy |
| Benefit flexibility – the option to increase or decrease your cover during the course of the policy. |
You should have the option to either increase or decrease your cover as your circumstances dictate If you increase your cover, you may have to provide additional medical evidence. |
| Policy term flexibility – the option to increase or decrease the policy term – ie the duration of the policy - during the course of the policy. |
You should have the option to either increase or decrease the policy term as your circumstances dictate If you increase the policy term, you may have to provide additional medical evidence. |
| Guaranteed insurability options – allows you to increase your cover at certain times without requiring further medical evidence. |
You should have the option to increase cover at set intervals or on the occurrence of a life changing event such as getting married, having a baby or taking on a bigger mortgage. The increase is subject to a maximum; any increases over the maximum may not be allowed or you may have to provide additional medical evidence. |
‘Could have’ features
| ‘Could have’ features | A good policy will give |
|---|---|
| Claims support services – provides help and support in the event of a claim to help you make a speedy recovery and return to work as soon as possible. |
Claims support services should be included as standard including helplines and information about your medical condition. Claims support services do not usually pay for medical treatments. |
| Health and wellbeing services – a health assessment and programme of healthy living activities to improve health and wellbeing of policyholders. |
A health and wellbeing programme should be included as standard and should offer tangible rewards (eg reduced premiums) for those engaging with the programme. |
| Critical illness buyback – following a critical illness claim, this option allows for the critical illness cover to be reinstated. |
A buyback option with a minimal premium should be offered Sometimes buyback is not permitted where the critical illness increases the risk of other claims within the term, eg for cancer claims. |
| Discount for exclusions – if an element of cover has been excluded, a discounted premium is offered. |
Discounts for exclusions of heart attack and cancer cover |
Things to watch out for
| Things to watch out for | A good policy will give |
|---|---|
| Number of exclusions – where cover is not provided if the illness is as the result of, for example, alcohol or drug misuse. |
Look for cover with the minimum of exclusions. |
| Number of conditions covered – the policy offering the most critical illnesses is not always the best value for money. Some illnesses are rare or the way the policy is worded makes it difficult to claim for them. |
Look for cover for the main critical illnesses that account for the majority of claims and will not charge significantly more for having a wide range of cover. |
The tables above set out what to look for, but if you want to know whether you need critical illness cover or not, or if you want to work out much cover you need, follow one of the links below:
This article is provided by the Money Advice Service.
