January 2006

CRITICAL ILLNESS COVER

Bill Saunders from Aberdeen based Acumen Financial Planning Limited takes a look at "living" insurances and in particular, examines critical illness cover.

Apart from basic life assurance there are a number of "living" insurances that are meant to provide financial assistance if ill health strikes. What are these and who are they suitable for?

Perhaps the best known these days is Critical Illness cover (CIC) which pays out a lump sum on the diagnosis of certain specified illnesses, for example cancer, heart attack or stroke. Having enough CIC to cover the mortgage for example could be ideal because if you suffered such a condition, a payout could mean being free to give up a stressful job which if continued, would only make things worse. One other tip - if you have an existing Critical Illness policy it is probably worth hanging on to. Generally premiums have gone up steeply in recent years as insurance companies have had to pay more claims. In addition for newer policies they have tightened up the definitions of what constitutes a claim.

The other major ill health protection is Income Protection (IP). For the breadwinner this is often more appropriate than CIC in that you can insure your income against being unable to work irrespective of the health reason that is stopping you.

Income Protection insurance does exactly that, but what particular policy will be right for you? For example, does the policy pay out if you were unable to follow your own occupation, but still able to fulfil a less demanding role? What is the insurer's pedigree in income protection? Does it pay its claims? Are the premiums guaranteed never to increase or are they re-viewable?

This is one area where taking advice can pay dividends in the long run, because as with many things in life cheapest does not necessarily mean "best".

Bill Saunders, financial planner at Acumen, can be contacted on 01224 573 904 or on www.acumen.info.