Serious illness cover – why it’s a good idea

Serious illness insurance, also known as critical illness cover, is a policy that pays you a tax-free lump sum if you are diagnosed with one up to 91 specified serious illnesses or disabilities which are covered by your policy. Although insurers can sell it independently, it is often sold as an extra benefit on a life insurance or mortgage protection policy.

Does a serious illness policy replace my income?

A serious illness insurance policy does not replace your income if you become unemployed due to long-term illness. The illness cover will only pay out if your policy covers your condition. Although many illnesses can prevent you from continuing employment, not all may be covered by your policy.

Which serious illnesses are covered?

Not all policies cover the same illnesses or common illnesses, such as treatable cancers or back injuries. It is always wise to check the details with your insurer before you buy your policy. Although the specified serious illness cover may vary between insurers, it usually includes.

  • Major organ transplant
  • Some cancers
  • critical burns
  • Kidney failure
  • Motor neuron disease
  • multiple sclerosis
  • stroke
  • coronary disease
  • benign brain tumours

However, it is essential to know that although a stroke is covered in the policy, a minor stroke may not meet the additional criteria. For example, for a claim to be valid, it may depend on the severity of the illness and whether or not it results in permanent damage. Therefore a policy may only pay out in the case of a severe stroke. Nevertheless, all the requirements will be laid out in the policy, so ensure you read it well.

How will I know if there are any conditions or restrictions?

The Central Bank of Ireland Consumer Protection Code requires firms to clearly explain the restrictions, conditions and exclusions that apply to their policy. Your medical history, lifestyle or job may mean that you may have both general and specific exclusions on your policy,

Policies vary, but they usually include:

  • cover for several serious illnesses listed on your policy, which may consist of permanent total disability
  • limited serious illness cover for your children
  • waiting list benefit

Finding cover for that specific illness may prove challenging if you have a pre-existing medical condition.

When should I consider serious illness cover?

Serious sickness insurance may be a good option if you have no alternative health insurance, are unemployed, and owe personal loans, bills, or mortgage payments.

In addition, critical sickness insurance can provide peace of mind if you have dependents or are self-employed.

There are three types of serious illness cover to consider

Stand-alone serious illness cover

This is a stand-alone serious illness policy unrelated to any other life insurance policy you may have.

The amount paid to you in a successful full payment claim is determined by the quantity of coverage you select.

Accelerated serious illness cover

As part of this combined life insurance and serious illness policy, you take out a life cover amount ( for example, 150,00) and serious illness cover (for example, 50,000).

If you suffer a full payment specified illness during the policy term, you will receive a lump-sum payment of 50,000. Subsequently, your life cover is reduced by 50,000 and is 100,000.

Additional serious illness cover

With this policy, you select a life insurance amount and an additional serious illness cover. If you’re diagnosed with a specified illness for which you are eligible for full payment, the serious illness cover is paid out, and the life insurance benefit remains at 150,000

How much does serious illness cover cost?

The amount and term of the policy will contribute to the cost. In addition, your medical history, health and lifestyle are all considerations that will influence how much you pay. Therefore, it is always wise to chat to your insurer about these considerations before buying your policy.

As the risk of you getting a serious illness is higher than the risk of you dying during your policy term, serious illness insurance is usually more expensive than life insurance. Although many factors influence the monthly cost of your insurance, some of the essentials include who the illness cover is for. For example, are you choosing single or joint serious illness cover?

Is joint and dual cover the same?

Both these policies are for two people, e.g. yourself and your partner.

A joint policy usually means a single payout from either serious illness cover or life benefit cover, at which point the policy ends.

A dual policy entitles both people on the policy to claim, even if one person dies during the term and there is a lump sum payout. The second policyholder will still receive benefits until the policy term ends.

Where do I buy serious illness cover?

You can buy serious illness insurance directly from an insurance company or broker. To apply for this cover, you can apply for this cover by filling in what is known as a proposal form. Some insurance companies do offer you extra benefits on their policies; however, this usually incurs additional costs too.

What are the additional benefits?

Inflation protection: This means an increase in your cover each year to allow for inflation

Hospital cash- If you are hospitalised due to illness, you will receive a daily payment for each day you are there. Your policy may state a specific waiting period before your payment commences.

Personal accident benefit- For a limited period, you will receive a weekly payment if you become unemployed due to an accident.

The conversion option: allows you to convert your cover into a new policy as you age, even if your health has deteriorated.

What to look for when Finding the best critical illness cover

Your choice will depend on your individual needs, but there are a few things to consider:

Choosing the right amount of cover: Consider your outgoings, any other income or additional protection you may have.

Choosing the correct term: Consider financial commitments, dependants and retirement plans.

Choose the correct type of cover: Consider if you need a life cover or a stand-alone policy.

What is your maximum budget: Think of your long-term repayments.

Check what other financial protection you have: Do you have another cover?

Consider the extra benefits you need, if any: Choose only those you feel are necessary.

Decide what illnesses you want to be covered: Check the total payment illnesses and ensure the ones you want to cover are included, and the definitions are reasonable.

Once you know exactly what you need, it’s an excellent time to compare quotes.

How do I claim?

You can only claim the benefit on your policy if you meet the following three conditions.

  • Your illness is one which is covered by your policy at the time of your claim.
  • A medical diagnosis confirms and matches the definition of that illness outlined in your insurance policy terms and conditions.
  • You survive for a period after diagnosis – the period is usually written in the policy.

How many times will my serious illness cover payout?

This depends on several factors, including your benefit’s value and what you claim for first.

You can claim partial illness payouts, but some policies do restrict you to one per person.

Partial illness payouts are separate from your total payment illness benefit. Therefore, you are still eligible to claim a full payment illness if you have previously only claimed partial payments.

Once you have made a full payment illness claim, you can no longer make other claims, and your policy will end.

When am I not covered?

There are many situations where your serious illness policy may not cover you. You will not usually be covered if:

  • your illness is related to drug or alcohol abuse, self-inflicted injury or failure to follow medical advice
  • you had a pre-existing condition before applying for insurance, and you failed to state this in your application
  • your situation is the result of being involved in dangerous or criminal activities

You live outside the ‘territorial limits of the policy for a certain number of months of the year. The territorial limits may vary from policy to policy but would usually mean all EU countries.

Is critical illness cover worth it?

Critical illness cover may give you peace of mind and help cover costs while recovering from a serious illness.

Your circumstances and whether or not you have other financial protection will determine if it is right for you.

For example, you may not need as much coverage if you have income protection. However, it may be reassuring to know that you can combine it with life cover, and your children are automatically covered.

When am I not covered?

If you think want to learn more about serious illness cover, make an inquiry below to get in touch with a member of our team.

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