What’s the difference between life insurance and critical illness cover?
Let’s start with life insurance. This is the easiest one to describe because it’s self-explanatory: life insurance pays out a lump sum of money, tax-free, if you die while the policy is in place. The idea is that this will protect your family financially by paying off your mortgage and other debts and providing an income for them.
Critical Illness cover is different because it pays out a lump sum if you are diagnosed with one of the critical illnesses covered by the policy, such as cancer or stroke (the list differs from company to company).
Here’s the main difference: whereas life insurance only pays out on death, critical illness cover can pay out before then. In fact, most people who claim on their critical illness policies claim within 5 years of taking it out!
Is critical illness cover worth it?
Let’s start by looking at what critical illness cover is and what it does.
Critical illness cover pays a lump sum if you’re diagnosed with one of the serious illnesses included in your policy. So if you later develop cancer or suffer from a heart attack, for instance, your insurer will pay out. You can spend that money however you like – to take time off work and recover, switch to part-time working hours or just give yourself some financial security while you deal with the diagnosis.
If the worst happens and you pass away before claiming on your critical illness insurance, your dependents will receive a payout as per normal life insurance rules.
Get multiple critical illness insurance quotes
There are a few ways to get quotes for critical illness cover. You can either use a comparison website, or you can do it yourself. If you decide to go direct, it’s important that you compare the benefits as well as the price. To make this easier, there are some things to look out for that tell you a little more about the policy:
- Type of policy: There are three main types of critical illness cover – fixed-term (for a set period), joint-life (covering both of you) and whole-of-life (covers your whole life). Think about what type will suit your needs and budget best.
- Type of illnesses covered: Every insurance company covers different illnesses and conditions – make sure the companies on your shortlist include the ones that most concern you.
- Definitions: It’s important to understand how each company defines critical illnesses to ensure they’re covered if they occur. For example, some insurance providers say cancer is only defined as covering specific stages; others have different definitions of heart attack and stroke. Make sure this matches up with your personal circumstances, so you know exactly what is and isn’t covered by each quote.
Define what you need from critical illness insurance
It’s important to set clear, SMART fitness goals before you begin. Don’t worry about what other people’s goals are, because chances are their bodies and their situations are different from yours. SMART stands for specific, measurable, achievable, relevant and timely. A goal like “I want to get fit” isn’t very helpful on its own – it’s too general. Instead of trying to change everything at once, start with some achievable targets that you can tackle in the next few months. Here are a few examples:
- I will do 30 minutes of cardio every day
- I will be able to run a mile in under 8 minutes by April 2018
- I will join a gym and go three times per week
Pay attention to exclusions and waiting periods
It can be easy to assume that critical illness cover is the same wherever you go, but there are many things that separate one insurer from another. The main ones you need to know about are exclusions and waiting periods.
Exclusions
Some conditions have a pre-existing condition exclusion attached to them, so if you become ill with that condition, your claim is denied.
Waiting periods
The usual waiting period for critical illness cover claims is two years, but it can vary between insurers, so pay close attention to this when you compare policies. If you want to avoid the waiting period altogether, some insurers offer an option where you pay more for your premiums and in return get your policy without any waiting period attached.
Choose your policy term carefully
When people decide they want to get in shape and lose weight, they can fall into the trap of not setting realistic expectations. A lot of people jump right into a fitness routine and hope for the best, but this is not an ideal way to start. It’s important that you define what problem you’re trying to solve by working out (and then writing it down). Do you want to run a marathon? Do you want to be able to climb the stairs without being winded? Find a healthy body fat percentage? Write down your goal so that you can refer back to it during tough workouts. And don’t worry about what other people are doing or what they want for themselves and their bodies–this is all about you. Be ambitious: if there’s something specific you have always wanted, go for it. Just remember that while dreaming big is fun, staying realistic is crucial. You won’t see any results if your goals aren’t reasonable. Setting small goals within larger ones can also help motivate when you feel like giving up or losing steam on your main goal (e.g., “I’ll do three more reps/run another mile/stay on this rowing machine until I reach 10 miles”).
Compare the cost of premiums with and without upgrades
If you want some additional benefits, it’s worth upgrading to a higher level of cover. For example, if you are in a high-risk profession such as the police force or armed forces, you may consider an upgrade because the standard policy may not offer enough cover for your situation. It is also worth investigating upgrades if you have an unhealthy lifestyle (such as smoking), are older or have a history of health issues in your family.
It’s important that before deciding on upgrading to a higher level of cover, be sure to check out what each offers and get quotes from different insurers.
Life insurance with critical illness cover is a good idea if you are looking to protect your family.
- Life insurance with critical illness cover is a good idea if you are looking to protect your family. If you would like to know more about how life insurance works, visit our life insurance guide.* It’s important to compare the cost of premiums with access to upgrades before selecting a policy. For example, it may be cheaper for your partner or spouse to buy a standalone critical illness policy rather than opting for critical illness cover within your existing life insurance plan.