Typically, you pay a monthly or annual premium for the cover.
There are three main types of critical illness cover:
a) Stand-alone cover
A stand-alone policy is one that is purchased regardless of, and independent of, any other policies you may have, such as life insurance. Therefore, for example, if you have life cover insurance and critical cover, if you get a critical illness, your critical illness cover pays out and your life insurance cover would continue.
b) Combined cover
In some instances, you can buy critical illness cover “built-in” to your life insurance policy and if that is the case, the cost of the critical illness cover is included in your life insurance premiums. With a “built-in” policy, you get a payout if you die or if you get a critical illness. There is only one payout, so such policies tend to be a more affordable option than say two separate policies for life insurance and critical illness cover purchased separately.
c) Decreasing term cover
Decreasing term cover is a critical illness policy that pays out less and less as time progresses. This is usually linked to the amount left to pay on, for example, your mortgage.
Over time, you may consider that your financial needs lessen as for example, the amount outstanding on your mortgage and other debts decrease, and therefore the lump sum payout decreases to mirror that. For that reason, decreasing term critical policies tend to be cheaper.
What is the difference between critical illness cover and terminal illnesses?
Critical illnesses are serious ailments that may or may not be life-threatening.
Terminal illnesses are incurable diseases where a person is expected not to live longer than within 12 months of their diagnosis.
It is worth noting that most insurance providers will include terminal illness – which also could include illness or injury resulting in total and permanent disability – as part of their cover.
The information provided in this article is not intended to constitute professional advice and you should take full and comprehensive legal, accountancy or financial advice as appropriate on your individual circumstances by a fully qualified Solicitor, Accountant or Financial Advisor/Mortgage Broker before you embark on any course of action.
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