Janet Knight Investigates: Critical Illness Plans

Critical Illness: What if it happened to you? Janet Knight Investigates When critical illness strikes within a family, all attention is naturally focused on the recovery of the person in question. But what if this recovery is a slow and uncertain process that requires months or maybe even years of treatment and continued care? That such an agonising scenario places a heavy burden on the other members of the family seems obvious enough, but besides the emotional, physical and social stress, there is an additional strain that is often overlooked in such situations, namely the prospect of financial ruin. It is an irony of life that a family is left financially secure if one of its breadwinners dies, but that it can face financial disaster when someone who survives critical illness is unable to return to work for a long period of time. Life Assurance covers the former eventuality, but until quite recently there was a little you could do to protect yourself and your family from the latter scenario. The longer the required convalescence, the greater the pressures on one’s financial situation become; a household’s income can be halved or almost completely decimated, often without any clear indication of when things may get back to normal again. To aggravate matters, medical and nursing costs are high, and extra help is often required as one spouse suddenly finds him or herself faced with the responsibility of providing income, looking after children, running a household and nursing their loved one. Not surprisingly, then, many a family who has found themselves in this predicament have had to take emergency measures and even sell their homes to make ends meet. The degree of impact on people’s lives varies with their individual situations, but almost always there is a drop in the standard of living and a high degree of anxiety about one’s financial future. So, although the wonders of medical science are thankfully increasing our chances of surviving critical illness and recovering from it, it seems that we are more than ever dependent upon our own initiatives to provide for the eventuality of prolonged loss of income through long-term convalescence. A Critical Illness Plan provides a lump sum cash benefit to help relieve financial pressures following a critical illness. The strain of wondering how you will meet the mortgage payments or provide for other expenses is even heavier in the case of single people who cannot rely on a family network. State provisions do exist in many countries, particularly within Western Europe, but even these do not cover more than the basics and cannot, therefore, prevent a serious decline in one’s standard of living. To protect your property and lifestyle, and not be totally dependent upon the social security system, it is advisable to look into a savings plan that has been designed specifically to cater for such an eventuality. Up until about 20 years ago, no such provision existed, but nowadays you can take out a critical illness plan or simply supplement your life assurance policy to include this highly specific kind of cover. “A Critical Illness plan provides a lump-sum cash benefit to help relieve financial pressures following a critical illness”, “How the money is spent depends entirely on the policyholder, be it to pay off an outstanding mortgage, pay medical bills resulting from the illness or even just provide income substitution during the recovery period. “As with all savings plans, what you get out of it reflects both what you’ve put into it and the amount of time it has had to mature and grow. The younger and healthier you are, the easier it will be to build up a healthy sum that will keep the wolves from the door in any eventuality, but the actual level of cover will depend upon your personal circumstances. Your financial adviser will be able to advise you on this. “Critical Illness Policies cover a great many possible illnesses and there is an even cover for the eventuality of permanent and total disability. Naturally, nobody likes to think of such a terrible possibility, but unfortunately, serious illness strikes frequently enough to necessitate making provisions for it.” “Ones’ age and state of health (determined through a medical examination) are the main factors that establish the degree of risk, but the amount of cover you want to build into your separate Critical Illness Plan or the supplement to your Life Assurance depends on how much cash you want to have available in the event of prolonged medical attention. Besides protecting your home and substituting income for a while, you will also want to be able to afford the best possible private medical treatment available. The need to cover the main breadwinner in the family is an obvious one, but the policies are flexible enough to allow you to change your cover or take out an additional plan to include your spouse or children.” Not having to worry about your financial situation will enable you to devote your attention and energies to getting well again.

Ready to chat with
a specialist?

Get started

You may also be interested in

Behavioural finance

Behavioural finance: the psychology of investing

Behavioural finance theory suggests we make decisions based on emotions rather than logic. Understanding it could help you make better investment decisions

Read more
The benefits of a financial second opinion

5 benefits of a financial second opinion

In this article, we explore the five key benefits of a financial second opinion and why a fresh perspective could be just what you need.

Read more
questions to ask a financial adviser

7 Questions to ask a financial adviser

We look at the key questions you should ask a financial adviser before hiring them and one important question you need to ask yourself.

Read more
Time is running out to top up your UK State Pension

Time is running out to top up your State Pension

Time is running out to top up your State Pension. Here is everything you need to now about State Pension top-ups.

Read more