Critical illness cover.
Critical illness cover (CIC) pays a cash lump sum on diagnosis of one of a number of specified critical illnesses, such as invasive cancer, stroke or a heart attack.
What is critical illness cover?
Critical illness cover supports you financially if you're diagnosed with one of the conditions included in the policy. The tax-free, one-off payment helps pay for your treatment, mortgage, rent or changes to your home, such as wheelchair access, should you need it.
What are the benefits of critical illness cover?
Critical illness cover is a long-term insurance policy. The insured receives a tax-free lump sum if a doctor diagnoses that they have one of the serious illnesses covered by the insurance policy.
The fact that someone under 65 is five times more likely to suffer a critical illness than to die, highlights the advantages of this type of insurance. They can use the proceeds of the policy as they wish and can include:
- paying off the mortgage or other loans
- allow for modifications to the home (wheelchair access)
- use the lump sum to maintain their lifestyle
Critical illness cover can, however, be expensive and there is no guarantee that the policy will cover the condition affecting the individual.
What types of critical illness cover are there?
The main types of critical illness policies are standalone policies, combined with life cover and reviewable policies.
| Policy type | Description |
|---|---|
| Standalone policies | These have no life cover and can be guaranteed or reviewable. Some policies have a limited term; others are 'whole life' critical illness cover policies. Premiums are higher than for basic life assurance contracts because of the higher risk. Some policies pay regular instalments of capital rather than a lump sum, in much the same way as a family income policy, as it is a cheaper alternative. |
| Policies combined with life assurance | The sum assured is payable on death or diagnosis of a critical illness, whichever occurs first. This is usually an 'accelerated death payment' made during life as an alternative, not an addition, to the death sum assured. An alternative to accelerated death benefit cover is to buy separate life and critical illness cover. This is often only a little more expensive than the combined contract and offers the possibility of a pay-out both on diagnosis of a critical illness and on subsequent death. There is also the option to take different sums assured for the life cover and critical illness benefits, thus further reducing the cost. |
| Reviewable policies | These policies are reviewed every five to ten years on the rates current at that time. The rates are based on general advances in medical science, not on individual circumstances or the health of an individual assured. Reviewable premiums are generally up to 50% cheaper than guaranteed ones. |