Coming down with a serious illness can wreak havoc on an individual’s life and that of their family. During such a difficult time, any way to mitigate the stresses of dealing with the illness would be a relief.
An individual is more likely to become seriously ill during their working life than they are to die during that same period, yet many of working age do not fully understand the ramifications of becoming so ill that they cannot function normally and remain more likely to have life insurance than critical illness.
Stuart Tragheim, sales director at Engage Mutual Assurance, says, “Common barriers from consumers are lack of awareness, perceptions that the insurance products to protect against these eventualities are costly and complicated to purchase, and confusion between critical illness, income protection, and accident, sickness and unemployment (ASU) type products. Many young people believe that they are immortal and have an ‘it won’t happen to me’ mentality.”
Unfortunately, many people overlook critical illness coverage when considering protection plans. Taking out insurance on a home or vehicle is common, yet modern medicine has made it so that more people will live through critical conditions and thus be faced with the after-effects of an impaired and financially compromised life.
Of the 26.4m households in the UK in 2012, an estimated 20.2m have contents insurance, 19.6m have motor insurance, and 17m have mortgage protection, according to the Association of British Insurers (ABI).
However, cancer, heart attack and stroke – the three key conditions in any critical illness cover – affect a large number of people within the UK every year. It is estimated that more than 330,000 people develop cancer each year, over 160,000 die from heart and circulatory diseases and a further 150,000 suffer strokes.
Defining features
The ABI’s definition of protection products includes term and whole life assurance, critical illness, income protection, and long-term care insurance. Roughly 2.8m new protection products were taken out in 2012. There were 29m protection, term and whole of life policies in force, and holders of protection policies received benefits of around £36.1m per day, of which £32.8m was from pure life policies.
How are CI policies sold?
Critical illness (CI) plans vary by provider, but policies will usually pay out a lump sum if the illness meets its specified coverage guidelines. This differs from income protection (IP), which is often thought of as an alternative to CI, as it pays a lower replacement income for a set time, beginning as soon as the individual is declared unfit to work for any reason.
