Your age
The cost of cover is calculated on a number of different factors, including your age.
- Why does age affect the cost of cover?
As you get older, you are more likely to develop a critical illness. This makes it more likely that the insurance company will have to pay out on the policy. The insurance company will therefore charge you a higher premium for the cover.
- How does this work?
When you take out critical illness insurance, your premium could be lower if you are younger and in good health at the time. This is because older people and those with pre-existing medical conditions are considered to be at higher risk of needing to make a claim, making them more expensive for insurers to cover.
Insurance companies may offer different terms based on your age but usually only after certain ages – usually between 45 and 60 years old. Some policies may charge an additional premium or not offer any benefit if they think there is an increase in risk due to your age or health condition; this is called ‘exclusion’.
Your lifestyle
“Is that what it’s going to cost us to cover the cost of a critical illness?”
“What’s a critical illness? And where did we hear that word before?”
“Let me explain. When someone has a serious illness, they may need hospital care, drugs or treatment and sometimes those needs are very expensive. If someone is sick and they don’t have the funds available to pay for the care out-of-pocket, there might be some help from their employee superannuation fund (ESF) or private health funds.”
“That sounds like something I should know about because isn’t my employer paying for our ESF in addition to all this other level of insurance we have?”
“…that wouldn’t work either.”
Your health
Health
It goes without saying that your health is the most important factor in determining the price of your critical illness cover. Your health includes:
- Your medical history: This includes your health conditions, your genetic history and any family medical history you are aware of. It also includes whether you have had any operations, or whether you have had any serious illnesses.
- Your vitals: These include your blood pressure, cholesterol level and blood glucose level. They also include your weight and height.
The amount you need to cover
The sum you want to be covered for will affect the price. Since it’s in your best interest that critical illness cover ends up being a good investment, only choose an amount you can afford and think about how much money you’ll need to support yourself and your family after diagnosis.
When choosing a payout amount, consider:
- The length of time you might need financial support for – how long could it take to recover from illness or disability?
- Your existing savings – do you have enough money saved up to pay for day-to-day expenses if something goes wrong?
- The cost of living in your area – this is particularly important if you live in an area with high living costs (like central London).
Whether you smoke or not
Smoking status is one of the most significant factors that can affect the cost of critical illness cover. Smokers are naturally at increased risk of a number of illnesses, including some cancers and heart disease, and so may be charged more for their premiums or even refused a policy in some cases.
The longer you have smoked for, and the number of cigarettes you smoke each day will also be taken into account when insurers assess your risk.
There are many things that affect the cost of critical illness cover.
There are many things that affect the cost of critical illness cover.
You may be surprised to find out that your age and health can affect the cost of your critical illness cover, as well as the amount of cover you need and whether you smoke or not. Lifestyle is also a factor, with some insurers charging different premiums depending on whether or not you enjoy high-risk sports or have recently visited a country where there has been an outbreak of disease. It can be confusing but it’s worth shopping around to make sure you get the best deal for your circumstances. It is most important thing to make sure that you get enough protection to meet your needs.
It’s also worth bearing in mind that the type of policy you select will affect cost: for example, if you want level term critical illness cover rather than decreasing term, this will usually increase what you pay for your policy each month.