Critical Illness Cover

Critical Illness Cover

All about critical illness cover with Marty Naan.

What is critical illness cover and what is this insurance for?

Unlike life insurance, critical illness cover is insurance that’s designed to protect the policy owner. On our life insurance podcast we talked about how that product is there for other people – not the policy owner.

But critical illness is specifically designed to protect the policy holder, and potentially their family too. It’s an insurance that you would take out for yourself, and it pays a lump sum of money if you’re diagnosed with a specific illness or you undergo a specific surgical procedure.

How does critical illness cover differ from life insurance?

Life insurance really is about protecting somebody else. Critical illness insurance is about protecting you. It also doesn’t pay out if somebody passes away, but it would pay out for one of the illnesses listed on the policy.

If you’re diagnosed with one of those illnesses, or you undergo a surgical procedure, then the critical illness policy would pay. There’s a long list of stated illnesses and these can vary slightly across different providers. But very common examples are different forms of cancer, dementia, organ transplant, limb paralysis, stroke and heart attack.

Those are all the kinds of critical illnesses that would be covered – generally, these are all conditions that would impact your life and your ability to work.

Who is critical illness cover for? Can anyone get it?

Critical illness cover is for anyone. The eligibility for it is really straightforward: as long as you’re aged between 17 and 59 when the policy starts, you’re eligible. That’s it.

People typically link these types of insurances to having a mortgage. But you don’t need a mortgage to have critical illness cover. You might want the security of knowing that you have access to funds if you suffer a critical illness. Maybe you want to ensure that you can have private health care, or funds to adapt your home to accommodate any consequences of the illness.

You can absolutely do that with critical illness cover. Whether you’re a homeowner, you’re renting, you’re living at home with parents… everybody can have critical illness cover and it’s there to ensure that you stay financially safe in the future.

Can you combine life insurance and critical illness cover?

Absolutely and it’s a really common type of policy – life and critical illness cover. It’s designed to protect in any scenario. It’s a type of policy that pays out the first time something happens – if somebody either passes away or suffers a critical illness, it would pay out and that policy would then expire.

It combines all the aspects we’ve discussed into one policy, and the main reason to choose a single policy is it saves money. Here’s an example – if you were a couple and both of you wanted life insurance and critical illness insurance, essentially those are four different things. There are two life insurance and two critical illness policies.

Having four different policies can be very expensive. It’s a bit like car sharing rather than taking two cars. It’s going to cost you more to take two different cars because it’s double the petrol cost. Here, you can put everything all into one policy and save money. It provides all the protection you need at a very cost-effective monthly price.

How much does critical illness cover cost?

Again, it’s similar to life insurance. There’s no cost for actually setting up the policy. There is only the monthly premium to pay. But the cost isn’t something to worry about because you decide how much you want to spend.

There are factors that we’ll take into account when deciding on the cost, and a lot of them are based on the claim preference. These are things like, what do you want to protect against, how much do you want the payout to be, how long do you want that protection for?

Because all of these things are client driven, the cost is in your control. It’ll be designed around your budget.

What else is important to consider with critical illness cover?

Critical illness often seems to be the forgotten area in insurance discussions. It’s almost as if people don’t want to accept that this can happen to any of us. But nobody’s invincible.

Becoming ill can happen without warning and without reason, and that’s why critical illness cover is typically more expensive than life insurance. The truth is that there’s a higher risk of suffering a critical illness than there is of passing away, especially during a mortgage term.

So it really can happen to anybody. The safety net of that lump sum of money is absolutely priceless. I’m going to give you an example of a heartwarming story. I’ve recently been in touch with a client who came to me about five years ago. At the time of our appointment, she wanted life insurance – she was only around 23 or 24, she was single and had no dependents. I told her that she didn’t need life insurance and I wouldn’t let her set it up.

She wasn’t very happy at the time. But I explained why and started to talk about critical illness cover and how it was more suitable for her circumstances. Thankfully she agreed with me and we ended up organising a policy.

At the end of last year that client’s mum contacted me to let me know that she had actually suffered a critical illness and something very bad happened – but thankfully she’s on the mend and will recover.

If she had taken out that life insurance policy she would have nothing. She would have just wasted five years’ payments. But because we set up that critical illness policy, that client now has no mortgage. She is debt free. She’s under 30 and has a home to call her own with no mortgage on it.

That is exactly why we do critical illness. People think that because they’re young they won’t suffer a critical illness – but this girl was young and healthy and it came out of nowhere – but now she’s debt free.

Money can’t help with the emotional impact of suffering a critical illness. But imagine the freedom of not having to worry about making mortgage payments if you’re critically ill. You can buy that freedom with critical illness Insurance. That’s exactly what we’re talking about.

Your home may be repossessed if you do not keep up with your mortgage repayments.