Critical Illness Insurance Vs Life Assurance

 

When looking to protect your family financially, you have to address the painful situations where you are unable to work due to critical illness or even die early.

Having Critical Illness Insurance and Life Assurance are ways to cover for such an event.

What is Critical Illness Insurance?

Critical Illness Insurance pays out a tax-free lump sum or an income when you are diagnosed with up to 36 life threatening or life changing illnesses. Not only one of the big four such as heart attack, cancer, Parkinson’s or M.S. but also up to 36 others. Insurers have a list of conditions that they cover and the longer the list the better the policy. However, these are not all conditions that you will necessarily die from therefore, the pay-out will go towards helping you in your lifetime.  You can use it to pay off your mortgage or any outstanding debts, adapt the home to meet your needs or simply provide you and your family with an income for life.

Either you can get a fixed or reviewable policy, which means that you pay fixed amounts each month or have the payments reviewed usually every 5 years. For the reviewed policy the initial cost tends to be lower but can increase dependent on your age and any medical advances.

Critical Illness Options

Product	Pros	Cons
Standalone Critical Illness Insurance	More affordable	Works best with Life Assurance so your monthly payments will be higher than a single policy
Combined Life Assurance and Critical Illness Insurance	More affordable alternative then two separate policies	You’ll only get one pay out. Critical illness or death whichever is the first event.
As part of a mortgage protection (decreasing term) life assurance policy	Your mortgage is paid off in full if you die or are diagnosed with a critical illness, whichever is the first event.	Pays out on death OR critical illness, but only one pay out

 

What is Life Assurance?

Life Assurance only pays out a lump sum or will provide regular income to your dependents when you die or if you are diagnosed with a terminal illness. Anyone with children or dependants should have some life assurance to protect their family.

There are two main types of life assurance:

• Term life assurance policies: run for a fixed period of time (known as the ‘term’ of your policy) – such as 5, 10 or 25 years.
  This type of policy only pay out if you die during the policy term. There is no lump sum payable at the end of the policy term.
• A whole-of-life policy: will pay out no matter when you die, as long as you keep up with your premium payments.

It is recommended that you have Life Assurance if you have:

• Dependants, e.g. school age children
• A partner who relies on your income, or
• A family living in a house with a mortgage that you pay – a mortgage protection will pay off the mortgage if you die or either one of you if a joint mortgage.

You might also want a policy, which covers your funeral expenses.

Things to consider when deciding which is best for you and your family.

• How would you replace your income if you became unable to work?
• Would you need to adapt your home to meet your changed circumstances?
• How would you cover the mortgage or rent payments?
• Would there be enough to provide for your children’s education etc?

If you would like independent advice regarding critical illness insurance or life assurance please call us on our Freefone number 0800 193 1066 or click on the Protection enquiry button on Make an Enquiry tab.