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Critical Illness is a modern type of insurance policy designed to deal with the problems that have arisen in this era of modern medicine.
To simplify considerably, when life insurance was invented you tended to be alive and working or , if you got ill, you either recovered and went back to work within days or weeks, or you died.
If you got well then your income continued and you provided for your family. If you died your insurance policy provided for them.
Now a lot of conditions are severe enough to impair or prevent working, but medical advances ensure survival, albeit with a lower quality of life. Everyone knows someone whose life was forcibly changed by a critical illness such as cancer, heart attack or stroke. People who were not killed, but were either unable to continue in their profession, or who would be running a serious risk if they did.
Money is often a serious problem at this time and many people are reduced to relying on the State. This is not a comfortable position, especially if you have other debts at the time, ( mortgage, cars, credit cards etc. ).
Critical Illness policies pay a lump sum on either diagnosis of named conditions, or their progress to an agreed state. ( For instance a heart attack is a heart attack, but Multiple Sclerosis might not actually impair your lifestyle for many years ). ( For income irrespective of cause of problem see Permanent Health Insurance, PHI ).
There are no strings attached to the Critical Illness payment, and you can act as your own circumstances dictate. ( If you are likely to recover after a year or two of rest then you can simply use the money as income. If the problem is permanent you might want to settle debts, pursue private treatment, or take such other action as you wish ).
When choosing a Critical Illness policy you should see what is covered and read the definitions. ( They are not all the same. Different companies apply different definitions of conditions, although there are moves to standardise the definitions of the more common critical illness conditions this is not yet complete ).
You should also choose the right type of Critical Illness policy. The main options are Term and Whole of Life policies, and, although normally taken out to cover a mortgage, or for simple personal self interest, they are sometimes used for Business Protection, ( esp. Keyman ).
You can have Critical Illness policies with or without life insurance attached. ( A single person protecting their mortgage with Critical Illness does not need life cover, but if they had a partner they would ).