We’ve over 30 years experience providing independent advice on:
Critical illness cover
Unfortunately, the sad side of this area of business is helping clients with policy claims after suffering a life changing serious illness or disability, and bereaved families who have lost a partner, or mother or father, with a death claim. Even more sad, because we usually can’t do anything, is when we are contacted for help by a bereaved partner who’s plummeted into financial difficulties because there was insufficient or no life assurance in place.
In years past, it was a condition of a mortgage that the borrower(s) had a mortgage protection policy. Not only that, but the policy was “assigned” to the building society or bank. This meant that if a borrower died the insurance company sent the policy pay-out direct to the building society or bank and the mortgage was paid off. It also meant that the building society or bank would be informed if the policy holders stopped paying the policy premiums. Whilst this practice could be viewed as somewhat “hard line”, it ensured that bereaved families didn’t lose their homes.
If a mortgage, household bills and budgeting is based on two incomes, it follows that the loss of one of the incomes because of death or serious illness or disability, would be catastrophic and in all probability would result in the mortgage falling into arrears and the home being at risk of repossession. When taking up a mortgage it is therefore essential that suitable mortgage protection is factored into the mortgage budget.
A recurring a misapprehension is that being part of an employer’s benefit scheme means that employee’s families are taken care of should anything happen. In reality, employee benefit schemes, which are always to be welcomed, don’t. Death In Service lump sums are generally equal to 2 to 4 times salary which simply isn’t enough to replace years of lost future earnings or repay a mortgage. Furthermore, whatever benefits a scheme does provide only applies whilst the person remains an employee of the firm. Changing jobs means losing those employee benefits. The same applies to State benefits, any entitlement will not be sufficient to replace the lost income.
Suffering a critical/serious illness or disability poses an additional financial burden because if unable to work, income is lost and the person becomes financially dependent on their partner or family.
“Family” can include a partner and/or children. Whilst couples can be financially independent, more often they are partly or wholly financially dependent on each other, although this doesn’t necessarily mean that both are income earners. For example, a homemaker who looks after children. A death or serious illness or disability of either would have a profound financial impact.
Policies can be arranged to pay out a lump sum, or monthly a monthly income, or both and cover can be level arranged or decreasing basis. Life assurance cover and critical illness cover can be combined, in which case the policy would pay-out on which ever happened first, or they arranged in addition to the other, or separately, which could result in two pay-outs if the first claim was for a critical illness.
Is designed to replace up to a maximum of 60% of your salary (or net profit is self-employed) in the event that an accident, illness, or disability prevented you from working. The benefit is tax free which is why the maximum is less than your salary. The benefit is usually paid on a monthly basis whilst you are unable to work. Once you are deemed fit to return to work the benefit stops although the policy carries on and could pay-out again if your suffered a relapse or a new accident, illness, or disability. (This type of policy should not be confused with Payment Protection Insurance (PPI) which is a very different type of policy).
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