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Critical illness cover

Critical illness insurance provides the insured person with a tax-free lump sum or monthly payments in case of an illness specified in the contract. Types of illnesses covered under this type of insurance differ so it is important to check the list of critical diseases before signing a contract. Most of the insurance providers include illnesses such as cancer, strokes and heart attacks. There are also some optional illnesses that a person can choose according to his needs. This allows the critical illness insurance contract to be tailored to specific needs. A very good benchmark for the number of critical illnesses covered is about 40. These illnesses are defined by the Association of British Insurers and it is wise to look for the definition ABI + on the insurance contract. This sign means that the contract covers illnesses above the minimum required level.

Critical illness level term insurance

There are two main types of critical illness insurance. The first one is called level term insurance contract and this kind of insurance will pay constant sums of money during the duration of the plan in case of a successful claim. It is advisable to use this kind of insurance if the person wants to protect his family members or insure an interest only mortgage. For example, if Alice decided to take £100,000 of critical insurance cover and had a claim that was successful she will receive the same amount of money in the first year as in the last year of her insurance contract.

Critical illness decreasing term insurance

An alternative to this kind of contract is called decreasing critical ilness insurance. This type of insurance will pay decreasing amounts of money through the duration of the contract and is used most often when a person wants to protect the payments on a mortgage type of loan.

In addition to choosing a level term or decreasing critical ilness insurance a person can also choose from two types of premiums: guaranteed or reviewable. A reviewable premium is usually cheaper and can be altered or lowered after a specified amount of type. This period is stated in each contract but usually it is five years. The guaranteed premium is more expensive and remains unchanged during the insurance contract.