You want a lump sum if you were to die or become very seriously ill and could not work again. What sort of insurance do you need?

You need Life Insurance and Critical Illness Insurance policy.

STEP 1 of 2
Type of cover
Life Insurance       Mortgage Life Insurance
 
Cover Level (£)

Number of years
Do you want:  
Critical illness cover
Family income benefit
 

The Life Insurance provides the lump sum if you were to die whereas the Critical Illness Insurance pays out a lump sum if you are diagnosed with any of a long list of serious and debilitating illnesses scheduled in the policy.

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How long should you insure for?
20 to 25 years is most common but it really depends on how much you can afford and your personal circumstances.
What is “Total and Permanent Disability”?
“Total and Permanent Disability” means that if you are diagnosed with any illness, or have an accident, that totally and permanently prevents you from working, you have a valid claim.
Are future children included on a Critical Illness policy?
All natural, step and legally adopted children are insured under a Critical Illness policy so long as they are aged between 1 and 18 years (although some companies only consider children from aged 3).
What happens if your condition improves after making a claim on your Critical Illness policy?
Once the insurance company has paid you the money is yours to spend how you like. The policy is terminated and your insurer has no interest on how you live your life or indeed whether your condition improves or is healed.
Can you extend or increase your Critical Illness cover at a later date?
If you have a policy with a renewable option then yes, you can increase, or sometimes extend, your cover. If you do not have a renewable option then you cannot change your cover. These days only a few insurance companies offer policies with a renewable option.
If you buy a policy which combines both types of cover and have a claim under its critical illness provisions, the policy will pay out - but it will not pay out again if you were subsequently to die. As soon as a combined policy makes any payout, the policy automatically terminates and there are no more premiums to pay - and no more benefit to be had.

If you do opt for separate life and critical illness policies, then each policy pays out without any reference to the other policy. Therefore, if you contracted a critical illness, then the critical illness policy would pay out and if you subsequently died the life insurance would pay out. So in these circumstances there are two claims and two payouts.

However, a combined policy is likely to be significantly cheaper than buying separate life insurance and critical illness policies.

 

Frequently Asked Questions related to the above topic.
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