Is Critical Illness Insurance a Waste of Money?

In the UK, nearly 20% of men and 17% of women will be diagnosed with a critical illness such as heart attack, cancer, or stroke before they reach the age of 65.

Critical illness insurance won't decrease your chances of becoming critically ill, but it can help ensure that a critical illness won't have serious financial consequences for you or your family.

Most people understand the importance of life insurance. Everyone will die eventually, so it only makes sense to invest in that certainty and provide for your loved ones after your death. However, it seems that a much smaller number realise how important critical illness insurance can be. Most people think "it won't happen to me" but the unfortunate fact is, it can and does happen. Just think about your family and friends, people you know at work, and chances are you'll know of several people who have had critical illnesses.

Critical illness insurance pays out a lump sum, usually within 28 days of your diagnosis of a critical illness that is covered by your policy. The money can be used for any purpose; for example, to pay off your mortgage, adapt your house or car for wheelchair accessibility, or simply to provide income if you are unable to work.

One of the main reasons people decide not to get critical illness insurance is the expense. This type of insurance is more expensive than life insurance, because until a certain age, most people are more likely to experience a critical illness than they are to die. This means that many people put off getting critical illness insurance at the very time when it is least expensive - when they're young. The earlier you get this type of insurance, the cheaper the average premium payment becomes. Although the final premium will depend upon your medical history and personal circumstances.

Deciding whether or not you need critical illness insurance is a very personal choice, much more so than life insurance - simply because, of course, you can count on dying eventually, but you don't know if or when your health might suddenly take a turn for the worse.

Who needs critical illness insurance?

It's a personal choice, but it could be said that everyone does, because everyone has a chance of developing a critical illness, and most people will find themselves dealing with financial hardship if it happens. This is an important choice for single people as well as those with families.

If you live alone and become critically ill, without insurance you are likely to become dependent on the state, friends and family, and to suffer from the loss of income. As a general rule, if you know that you'll experience financial hardship if you become critically ill, and if you can afford the insurance, then it's a good idea to get it. This is particularly true if there is a history of a certain conditions in your family.

If you decide you do need critical illness insurance, it's important to do some research and find out exactly what types of critical illnesses are covered, and under what circumstances. All policies cover several "core" conditions such as cancer, heart attack, stroke, kidney failure, major organ transplant, and coronary by-pass surgery. However, some policies do not cover all types of cancer. In addition to these core conditions, individual policies may or may not cover a wide range of critical illnesses, including Alzheimer's disease, loss of limbs, sight or hearing, Parkinson's disease and third degree burns. Most critical illness insurance policies cover approximately 25 conditions, but the exact list will vary.

As such it's important to read the small print when comparing policies and be fully aware of exactly what conditions are covered and under what terms the cover will pay out. If in doubt, get advice from a professional, independent adviser who will recommend a suitable policy based upon your specific needs and budget.

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