The Importance of Critical Illness Insurance

Would a Tax-Free Lump Sum Help with Living Expenses?

Jan 20, 2009

Critical illness insurance provides a tax-free lump sum to help with living expenses. As soon as a life-threatening illness is diagnosed, critical illness cover pays out.

People can take out a critical insurance policy between the age of 17 and 70. Most people take out critical illness cover when they have a mortgage or a young family to protect. Others like to have the protection of critical illness cover to help with living expenses in case they are unable to work.

What is Critical Illness Insurance?

Critical illness insurance is regularly taken out in conjunction with life insurance. It is designed to pay out a tax-free lump sum to assist with living expenses for those diagnosed with a life-threatening illness. When unable to work, the last thing anyone needs is to be dealing with financial difficulties.

The Critical Illness Cover Application Process

Those applying for critical illness cover will complete an application form. This covers matters such as: age, weight and medical conditions suffered by a policy-holder and their immediate family. This information is passed to an underwriter who determines premium levels and medical condition exclusion.

What Diseases Does Critical Illness Insurance Cover?

Critical illness insurance policies vary considerably so it is important to scrutinise the policy specifics. Whilst critical illness cover normally pays out a tax-free lump sum to those who develop one of 30 diseases, all policies should cover:

Almost all insurers now adhere to the 2003 rules set out by the Association of British Insurers. These rules serve to tighten the conditions where someone can claim under a critical illness insurance plan. This meant that the conditions for a tax-free lump sum pay-out became more restrictive.

Most policies no longer: cover lymphoma or Kaposi's sarcoma in the presence of HIV, non-invasive skin cancers, and less advanced cases of prostate cancer. Always check critical illness insurance cover policies for specific details as they can vary considerably between policy providers.

Making a Claim under a Critical Illness Insurance Policy

Once diagnosed with a life-threatening illness, a critical illness insurance policy will normally pay out within a period of 28 days. Any payment made is a one-off, tax-free lump sum.

Taking out critical illness insurance is very important, but especially for those with a mortgage or a young family. A life-threatening illness isn't going to be helped by financial difficulties. A tax-free lump sum can take away the financial worry whilst the patient concentrates on making a recovery.

The copyright of the article The Importance of Critical Illness Insurance in Life Insurance is owned by Asa Ghaffar. Permission to republish The Importance of Critical Illness Insurance in print or online must be granted by the author in writing.