Why it's critical to get this insurance now

Financial pressures and mis-selling scandals have led to millions of us dumping optional insurance policies - including critical illness insurance. Yet new moves by insurers have made this vital cover better value for money. Here's how to get the most cost-effective protection.

With household finances coming under increasing strain, it’s little wonder that millions of us are seemingly doing away with optional insurance policies - particularly in the wake of the Payment Protection Insurance (PPI) mis-selling scandal. Consumer watchdog Which? estimates that some two million people were wrongly sold PPI policies they had little hope on ever being able to claim against.

And it seems that this scandal has - understandably - seen us lose faith in income protection products of all sorts. Recent research from insurance giant Aviva found that more than half (56%) of all British families have no life insurance or critical illness policies in place, while according to a separate study by Axa Life only 36% of women have any life insurance, and just a staggering 18% have critical illness cover.

Yet with official statistics showing that nearly two-thirds of the population suffer some form of critical illness during their lives, opting to ditch this vital cover could prove to be a significantly false economy - particularly if you can secure the right policy at the right price.  

The cost of securing a £100,000 lump sum across a 25-year period starts from as little as £18 per month for a 25-year-old man or woman. Taking out the cover at age 45 would see monthly premiums rise to £99 for males and nearer £90 for females.

What’s more, this could be the right time to consider taking out critical illness cover (CIC). Several major insurance firms are enhancing the number of conditions covered above industry standards while holding their premiums at the same price. We take you through the basics and identify the firms who offer you more.

The basics of Critical Illness Cover

Critical illness cover policies pay out a tax-free lump sum if you are diagnosed with a life-threatening condition or if you have to undergo major surgery that will prevent you from working. The majority of policies cover seven core conditions according to guidelines issued by regulatory body the Association of British Insurers (ABI).

The typical conditions covered are:

• Cancer
• Stroke
• Heart attack
• Kidney failure
• Heart bypass surgery
• Major organ transplant and
• Multiple sclerosis.

Among the additional conditions to look for in enhanced polices are coverage for:

• Parkinson’s disease
• Blindness and
• Motor neurone disease

But, as always when buying insurance, check the terms and conditions for any exclusions on these supplementary items.

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Get the right type of life insurance

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Payouts vary according to the severity of the conditions diagnosed and the terms and conditions of each policy. Higher coverage of £1m is available for the gravest conditions, and you can also ask your insurer for enhanced coverage for specific conditions in exchange for a slightly higher premium. Payouts are usually issued anywhere between one and 12 months depending on the severity of the diagnosis.

You should also be aware that if your existing life insurance comes with a terminal illness benefit, it doesn’t provide the same level of cover as CIC. These combined policies typically only pay out in the event of death or terminal illness - not in the event of a serious but non-life threatening illness.

Be aware too that CIC is often sold packaged alongside life insurance. In this instance, the policy will possibly be linked to your mortgage – which means that if you need coverage for care costs, you could well want to take out a stand-alone CIC policy. You could do the research yourself, consult your financial adviser or - if you don't already have one - you could ask one of our independent financial advisors for free guidance on 0800 804 8045, or use the lovemoney.com life insurance service to get a tailored CIC quote for your own individual circumstances.

Get more critical illness cover for less 

Most standard policies will only pay out according to strict guidelines listed within the policy document according to ABI standards and the diagnosis meets a tightly-worded definition in the small print. Yet many major insurers are now expanding the coverage offered by their CIC above industry standards - while at the same time holding premiums.

Legal & General is leading the way with wider definitions for 11 illnesses over and above the ABI standard. Four new conditions are included in the L&G policy:

• Mastectomy
• Open heart surgery
• Multiple system atrophy and
• The removal of an eyeball

And the insurer has promised that the new definitions will bring down the number of rejected claims. 

Elsewhere, Fortis has enhanced its CIC offering with 10 conditions upgraded above industry standards, including:

• Comas
• Paralysis and
• Third-degree burns.

The policy also comes with a new ‘Best Doctors’ service, which promises to provide customers with “access to worldwide medical information and an expert second opinion from the best specialists in their field” at no extra cost.

LV= has enhanced its CIC offering to remove age limits for claims involving Alzheimer’s and Parkinson’s diseases, as well as allowing policyholders to raise their cover without any medical or financial underwriting. AXA and Aviva have also scrapped limits for Alzheimer’s and Parkinson’s claims.

If you’re still unsure about whether you need critical illness cover, or have any questions about anything mentioned in this article, help is just a phonecall away. Take to an independent, regulated financial advisor at lovemoney.com on 0800 804 8045, or use the lovemoney.com life insurance service to compare the costs of critical illness cover online.

Disclaimer: At lovemoney.com, you can research all the best deals yourself using our online life insurance service, or speak directly to a financial adviser via 0800 804 8045.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated adviser (such as one of our advisers here at lovemoney.com), before acting on anything contained in this article. 

Please note that lovemoney.com critical illness cover is provided in partnership with the theidol.com, who administer the quote and apply service on behalf of lovemoney.com financial services. lovemoney.com is an Introducer Appointed Representative of lovemoney.com financial services, who are authorised and regulated by the FSA - FRN 479153. Registered office: 2nd Floor Golden House 30 Great Pulteney Street London W1F 9LT.