I am mindful that writing about critical illness and major diseases, and the impacts they may have on your health and finances, may seem crude during a pandemic.
Equally, you could view it as an opportunity to truly understand that unforeseen events have the largest impacts on your life. That is certainly very true when it comes to being diagnosed with what we call a ‘critical Illness’, which is most commonly a heart attack, stroke or the number 1 claim by a long distance, Cancer. If you are unfortunate enough to suffer one of these illnesses it can have a devastating impact on your life and finances.
You don’t want it until you need it
It doesn’t haven’t to be that way. As a mortgage broker, we don’t just find you the best mortgage rates, but we aim to keep you in the property also.
Much as the companies that invested in Business Interruption Insurance prior to Covid will be feeling very glad they did so. I am sure they’re would have been people inside and out of their business saying “what is the point in that, don’t waste the money”. But that may be the difference to them surviving the financial impacts of the pandemic.
Such is the case with ‘Critical Illness Cover’ for you on a personal level. The ultimate irony with any form of insurance is that you don’t want it until you need it, and at that stage it is too late. I suspect that is why the AA is so successful at what they do!
Therefore, it makes sense to look at what exactly Critical Illness is, what it does, how it came about, and what it does for you.
Let’s look at those points in more detail:
What is Critical Illness Cover?
This is a type of cover you can put in place to cover you against major illness like Cancer, Heart Attack, Stroke and typically up to 20+ other major illnesses.
If you are diagnosed with one of these illness, and meet the providers definitions, you will be paid a lump sum of money (free of any tax).
As the name suggests, this is to protect you against the financial implications of something like this happening, so it is designed to give you the money you need until you are back on your feet.
The amount will differ depending on your situation and objectives. The money could be put towards private or international treatment, that isn’t covered on the NHS or elsewhere. It could be to cover your income for a period of time you feel relevant so you can take time off work to get back to full fitness. It could be used to clear a mortgage, if you have one, to give you less financial pressure, or it could be used to make adjustments to your home or lifestyle that this event created.
I appreciate none of these eventualities are an enjoyable prospect to think about, but we always view it the other way around – imagine how bad it would be if you had financial stresses on top of your health issues? Surely that is a lot worse and is proven to prolong recovery times and even create new issues due to the stress money worries create on top of the actual issue that created the situation. While we can’t change the ‘bad thing’ happening, what we can do is minimise or mitigate any financial implications on you, which will speed up your recovery and leave you the headspace to focus on what is important – you.
How did Critical Illness Cover come about?
This type of cover was created by Dr Marius Barnard in 1983, a South African cardiac surgeon. He was motivated to speak to insurers, as he started to see that post surgery was when many of his clients real issues began. The financial implications often outweighed the medical. He saw that medical advances meant that more and more people will survive major illnesses and therefore this trend was only going to continue and get worse. Hence, ‘Critical Illness Cover’ was born.
This has proven to be extremely insightful as medical procedures improve in time, more and more people are surviving and potentially living with more complex medical needs. This places a huge strain on your finances if you do not have the money already saved up.
A recent report from L&G (called Deadline to Breadline) showed that the average UK household would last just 24 days if all their income were to suddenly cease. You can now see why if you can’t work due to cancer for example, the impact it has on you and then the period of Chemo afterwards, means you hit that wall pretty quickly. But thankfully due to the work of Dr Barnard and others, it doesn’t have to be that way.
Why should I take this out?
Unless you have this cover already set up, as a benefit from your current employer, or savings in excess of any financial liabilities and commitments you have, the simple fact is you need it.
If you have ever watched anything by ‘Stand Up To Cancer’ you will be familiar with the statistic that 1 in 2 people will get Cancer before they die. So if you factor in the other illnesses this cover includes, for most people, there is a 3/5 chance you will claim on the policy.
That very much ties in with the logic of Dr Barnard, seeing the trend of greater detection, treatment and ‘living with’ of other illnesses that previously had been terminal conditions. As most viewed them as terminal, many had not planned to live with them, or past them. Therefore the need for this type of cover for the vast majority of people should be a high priority. You should have a think about “what would I want to happen in this situation?”. Does that mean paying off your mortgage? Getting the best treatment in the world? Ensuring your lifestyle continues so you can cover school fees, car costs etc, rather than having to cut back? That is why everyone should take out this cover when needed.
“Money gives you options, and no money, means no options”.
Again, it is a crude but accurate statement that “money gives you options, and no money, means no options”. As responsible financial advisors, who want to ensure that our clients are in the best possible financial situation whatever life throws at you. We would welcome the opportunity to talk to you on this subject, identify what is needed and why, then present the best solution to you. As if you don’t, you may come to rue that decision down the line.