Protection 

How critical illness differs from other cover

This article is part of
Guide to Critical Illness cover

How critical illness differs from other cover

Critical illness cover is the most-claimed upon cover, according to respondents to this guide, as it helps people who are suffering from, and living with, critical illnesses to meet their daily financial needs.

Chris Atkinson, head of innovation for Zurich UK Life, says: "Critical illness is a very personal insurance we claim when life has dealt us a serious blow.

"To consider the real possibility of such an event needs forward planning, a maturity of mind and a willingness to protect against the worst - not just to benefit the individual but also, in many cases, their families."

Like life cover, critical illness cover has a defined term and can have guaranteed premiums, but the main difference is that critical illness plans pay out if someone is diagnosed with a critical illness that meets a provider's policy definitions during the term of the policy, and survive for a minimum period of time - in some cases, at least 10 days.

The policies do not have a cash-in value, and do not pay out on death, unlike life insurance policies.

Many plans pay out an additional lump sum if the policyholder is diagnosed with an illness that meets one of our additional critical illness definitions.

Many policies include children's benefits, which pay out an additional lump sum if any of the policyholder's children are diagnosed with a critical illness that is covered under the policy, or who die during the policy term.

Chris McNab, protection product manager for LV, summarises the difference between CIC and other cover in this way: "CI provides a lump sum if you are diagnosed with one of a list of specified conditions, illnesses or operations.

"This is different to life cover, which typically pays out on death, and is for the benefit of your loved ones, and is different to income protection, which will pay an income instead of a lump sum, and is usually paid for any condition that would stop you doing your job."

Alan Lakey, adviser for Highclere Financial Services and founder of the CI Expert, adds: "While many people laud the superiority of income protection, the fact is not everyone qualifies for income protection, due to their employer offering some form of cover, or their provable income is not high enough to provide a worthwhile level of insured income.

"By contrast, CIC is available to anybody with no realistic limitation on benefit or length of cover."

There are generally two types of critical illness plan cover: increasing and decreasing, which will be suitable for clients depending on the client's financial situation. 

Scope of cover

While providers will only cover the critical illnesses defined in their policies, many providers are ever-widening the scope of the cover.

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