Summary
An introduction to one very valuable form of life insurance called "critical illness insurance".
Critical Illness Insurance - Critical or Ridicule?
Back in 1999, the Imperial Cancer Research Fund stated that one in every three people in Britain will be diagnosed with cancer at some point in their life. With rapid medical advances the chances of survival from a major illness are improving but the consequences of suffering such an illness continue to be substantial and life-changing.
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Critical illness insurance can be sold as part of a mortgage package or additionally as a stand-alone policy. Critical illness cover can also be commonly associated with life insurance, with certain CIC policies paying out either on the diagnosis of a particular illness or on death, but not both, whilst other CIC policies pay out in both events.
When you first purchase the critical illness insurance policy, there might be an option for buy-back insurance, this would permit you to buy additional critical illness cover or life insurance, typically at a minimal cost, after you have made a claim on your existing CIC policy. It is often worth considering such an option, as the survival rates from a critical illness are usually very good and it can be extremely difficult to obtain new cover following a critical illness. Buy-back critical illness cover usually protects against the three major critical illnesses: heart attack, stroke and cancer from which you are most likely to recover, but also risk an attack later in life.
Bear in mind that when you take out life critical illness insurance, there is a standard waiting period between diagnosis and possible payout, from six months to a year for certain conditions, such as total permanent disability. However, if the diagnosis is very transparent, it is possible that the insurer would consider waiving the waiting period. The maximum payout varies from policy to policy thought it's not unusual to see capped payouts of £500,000 or £1 million, though cover for higher amounts might be available on request. When the policy is sold as part of a mortgage package, the lump sum is designed to pay off the loan on the home, but with other policies, there may be no restrictions on how you use the money. Suggested uses may encompass covering living expenses whilst you are off work, though the money could additionally pay for private medical treatment, carer services, home improvements, career retraining, help for your dependents and even a holiday or break away.
Nearly all critical illness insurance policies cover seven main conditions: cancer, heart attack, stroke, kidney failure, coronary artery bypass, multiple sclerosis and major organ transplant. Policy exclusions in critical illness insurance may include Alzheimer's or Parkinson's disease if diagnosed after the age of 60. Don't be seduced by long lists of ailments - as other policies may include these but under a broader heading. It is important to note prior to taking out a policy that there may be certain exclusions in the insurance contract which may prevent payout due to life choices and circumstances. According to the Association of British Insurers, the most common exclusions include:
* Aviation
* Criminal acts
* Drug abuse
* Failure to follow medical advice
* Hazardous sports and pastimes
* HIV/AIDS
* Living abroad
* Self-inflicted injury
* War and civil commotion
The consumer organisation Which? estimates that two thirds of the population suffer from a critical illness at some point in their lives. However, whilst the principle of critical illness insurance might be relevant, it is always worth ensuring your policy meets your exact needs, so if the worst happens, you're not caught out by the small print. It's important to shop around for quotes and different policies. Comparison sites such as moneynet and moneysupermarket will allow you to do this.
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About Rachel:
Rachel lives with her high horse in the Scottish mountains, near Edinburgh. Rachel writes for the personal finance blog Cashzilla:
Readers please note : You should undertake your own background checks before taking any action on any aspect mentioned in this article. Where the author has mentioned specific product details or given examples of how companies have reacted to specific situations, these should be correct as far as the author is aware when this article was written. In some cases additional background information not mentioned in the article has been used in obtaining the examples. Some examples or quotes may have been taken from information available in the public domain where all the background details may not be available. Insurers do change policy conditions and underwriting approach. They will view each situation on its own merits.
You should be aware that details of the topics written about within the articles can change. Therefore, always check out the current position before taking any action. You should also check that any action you are considering, or any proposed purchase, is suitable for your personal circumstances.
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