Critical illness

Protection

Critical illness

Critical Illness is a type of cover similar to whole or term life insurance, except that the sum assured is paid out following diagnosis of a life-threatening illness e.g. cancer or heart disease, rather than on death.

These policies aim to provide a lump sum payment at a time when extra money is often needed to care for somebody who is seriously ill and unable to earn a salary from employment. The lump sum payment is paid free of tax.

Statistics show that, for those still in work, there is far more danger of contracting a critical illness than dying before reaching retirement age.

So there is more need for critical illness cover than there is for life assurance on its own, but the premiums can be considerably higher to cover the increased risk. It is becoming common to take out a critical illness policy when applying for a mortgage.