Choosing a Critical Illness Insurance Policy

Critical illness insurance can help your employees to be able to afford treatments and keep their assets without having to worry about the financial burden.

Some examples of medical conditions critical illness insurance cover: cancer, heart attack, kidney failure, stroke, organ transplant, loss of sight/speech/hearing, Alzheimer's disease, etc. Watch closely because every policy is different.

Some critical illness insurance policies allow ways to reduce premiums. Some policies offer life coverage and critical illness together for a discount. Gym memberships are offered by other policies and when they are used together with health screening, premiums can go down. Non-smokers can sometimes save up to 50% with some policies. Smokers can still receive lower premiums by quitting for 12 months.

In general, critical illness cover is probably not the most appropriate way to insure an income in the event that an employee suffers a long-term period of incapacity or ill health and were unable to work. In such an eventuality, Income Protection (PHI) cover is usually a more suitable (and cheaper) way to do this.

Therefore, as critical illness plans pay the sum assured in a lump sum amount (as opposed to Income Protection plans that pay out a regular income), the first call upon such a payout is to clear all liabilities - i.e. mortgage and other debts. The rationale for this is that while recovering from a serious illness, the last thing needed is money worries and liabilities which often cause additional problems.

However, there are some other valid use for critical illness payouts - namely to cover the costs of a personal carer if an individual became so incapacitated by an illness that they needed additional help to perform normal activities of daily living (such as washing, dressing, preparing meals, etc). If this scenario was applied to a couple, even the incapacity of a non-working spouse with childcare responsibilities could lead to significant financial and emotional strain.

The cost of providing personal care depends upon many factors - such as the amount of care required (in hours of the day), but more significantly upon the area in which they live. i.e. the cost of employing a carer is always going to be more expensive in London that it is in Newcastle or Edinburgh.

Also, if an individual or couple has children under their care, if either party was incapable of working or looking after the children, it could become necessary to pay for childcare costs in order to continue working - as the alternative could be to leave work and rely on state benefits.

The same point about working out the approximate cost of childcare is similar to point about the costs of employing a personal carer, as it depends on many factors. A full-time nanny or child-carer will cost c. £20,000 per annum, but will be more in London, and less in other areas of the country. It also depends on whether such childcare is full-time or part-time, and whether the carer lives-in or lives-out.