3 protection products to help you protect your family if the worst should happen
Each year close to a million people in the UK find themselves unable to work due to a serious illness or injury (ABI ). And it’s not uncommon to confuse the cover you have, thinking you’re protected when you’re not.
This is why we’re going to discuss Critical Illness Cover, Life insurance and Whole of Life Cover in a series of short blogs to help you to understand what they are, who they are designed for, and how they can help you. These are complex insurance policies, and when taking them out, you need to understand them. Why? Because they absolutely have to pay out when you need them to.
What is Critical Illness Cover (CIC)?
CIC is designed to pay a cash lump sum or monthly income on diagnosis of a specified critical illnesses, during the policy term. CIC can help to ease the financial stresses of a critical illness as the pay-out can be used however you like – to make changes to your home or car, cover daily-living expenses, pay off your mortgage.
When Mr and Mrs A visited a Wren Sterling adviser they were sure that their mortgage was fully covered for life and that this included CIC. But, reviewing their protection, their adviser found that they only had Life and Terminal Illness Cover*. The adviser also found that while this couple were in their 30s, they had no will in place – so it was not certain what would happen if they were to die at the same time.
Reviewing their finances, it was clear that it would have been difficult for either of them to maintain the mortgage and care for the other person on one salary if either of them became critically ill. Mr and Mrs A now have appropriate cover in place, and have set up a trust to make sure that their wishes will be met in future.
Do you need CIC?
If you are unable to work, you may be eligible for standard statutory sick pay which is currently £89.35 a week (April 2017/18). The amount is decided by the government, and is payable subject to certain rules and conditions for up to 28 weeks. Do you know how much do you spend a week, and would £89.35 cover your outgoings? Do you think 28 weeks a suitable recovery period for a critical illness? If the answer to these questions is ‘no’, then you may wish to consider CIC.
Understanding your cover
Some people may think they’re covered, but misunderstand how their cover works. CIC is designed to pay out on diagnosis of specified critical illnesses. Unfortunately, there are examples of people misunderstanding how their CIC works. For example, a patient diagnosed with a cancerous cyst, had an operation to remove it, may not make a claim – even though they were entitled to, because they were then given a clean bill of health.
Depending on your policy, you may receive a form of CIC when buying other policies – such as Life insurance. These policies can also be more restrictive. Some combined insurance products pay out a lump sum if you die or if you get a critical illness – not both. In this case if you made a claim for critical illness your life insurance cover could end. We’ll cover this in more detail in the third instalment of this blog series, but the key takeaway is to pay close attention to what’s covered with combination schemes, as various companies offer different cover depending on the type of illness.
More blogs in this series:
All names have been changed in order to protect the individuals, but are real examples of how our advisers have helped our clients.
Your home may be repossessed if you do not keep up repayments on your mortgage.
*Terminal Illness Cover is typically intended to pay out a lump sum on diagnosis of a terminal illness, from which the policyholder is expected to die within 12 months of diagnosis. The exact period or illnesses included vary from provider to provider.
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