Critical illness cover is often called disability insurance. It is designed to cushion the financial effects of suffering a serious illness or injury. The insurance company pays out a specified amount in pre-determined situations that will differ depending upon the particular policy you take out.
If you become seriously ill or disabled and can not work, money may become a serious problem especially if you have debts (mortgage, cars, credit cards etc.) that you were planning to pay-off out of your future income.
Your private medical insurance (if you have any) may cover your treatment costs and your employer’s pension and life insurance arrangements may provide some assistance. Many people who do not benefit from either of these are reduced to relying on the State for their income at a time when their day to day expenditure is dramatically increased by their unfortunate circumstance.
If the worst happens, you will receive a tax-free lump sum to spend on whatever you need. If you are likely to recover after a year or two of rest then you can simply use the money as income to settle your day to day bills. If the problem is permanent you might want to settle debts, pursue private treatment, or take such other action as you wish.
Critical illness protection can be linked to life insurance. This will usually be cheaper than buying the two items separately.
When choosing a Critical Illness policy you should read the definitions of the conditions covered. Different companies apply different definitions.
Your home is at risk if you do not keep up with the payments on your mortgage or other loans secured on it.
