Level Term Critical Illness

What does level term Critical Illness Insurance cover?

Level term critical illness insurance provides a lump sum (a specific amount of money i.e. £100,000) in the event of a confirmed diagnosis of a defined critical illness during the term.

The term is the period of time the policy is in force.

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Below are links hopefully answering any questions you may have.

Why is Level Term Critical Illness Insurance useful?

It provides you with an agreed amount of benefit over a term which you’ve chosen. For example, if you wanted £100,000 of critical illness cover to be paid out on the diagnosis of a critical illness, then that will be the amount that will be paid as a result of a successful claim.

Unlike decreasing term critical illness assurance, that policy will pay out a decreasing value over the term.

The premium is usually guaranteed, which means it says that same throughout the term of the policy. There is an option which allows you to increase your premium and benefits inline with inflation so £100,000 today would still be worth the equivalent of £100,000 at the time of your valid claim.

What term can a Level Term Critical Illness Insurance policy be taken for?

The minimum length of cover will vary from lender but will usually be 2 years with a maximum policy length of up to 50 years. Your policy will also usually have to end once you’ve hit a certain age, e.g. once you’re 75 years old.

What is a Critical Illness? – definitions

A critical illness refers to a specified serious injury, illness or medical episode. The kinds of illnesses that are covered are usually long-term and very serious conditions such as a heart attack or stroke, loss of arms or legs, or diseases like cancer, multiple sclerosis or Parkinson’s disease.

Each insurance provider will operate differently and may have different definitions for what they consider a critical illness and what they will cover, so it’s advantageous to speak to an adviser to see what insurance product is most-appropriate for you.

Being left ill can leave you out of pocket, especially if your illness requires you to take some time of work or prevents you from working again.

Everyday expenses, paying off your mortgage or medical expenses can become in issue for some, so if so it’s great to have the right cover in place, tailored to your needs to prepare for the worst case scenario.

The pay-out received from a Critical Illness policy can be used in any way you like, and doesn’t have to be spent on anything in particular.

Before taking out any Critical Illness cover, check for any exclusions which may affect you.

Level Term Critical Illness Cover vs Decreasing term?

A Level Term Critical Illness policy’s cost & benefits will remain the same throughout the term. The only time this is not the case is if you have taken the inflation-proofing option, which is normally based on the RPI or CPI depending on the company you have taken the policy with.

What this means is that the value of your benefit will have the same monetary value throughout the term when you come to claim.

Decreasing term insurance will start off at the highest level and throughout the term will reduce generally inline with your mortgage as this is the most common reason for having it. These are based on the policies reducing yearly and as long as your interest rate for your mortgage does not reduce by any more than 5% or 8% then it should always cover the mortgage balance.

Unlike the level-term where the benefit will always remain the same so if you take out a £100,000 policy it will always pay £100,000. If you take out a decreasing term for a £100,000 mortgage over a 25 year term and your claim is 15 years into the term, you may only get £30,000 or whatever balance is likely to be left on your mortgage at the time(this is an estimate and not based on any specific policy, but just a guide so you understand that the decreasing term policy gets lower every year).

How many times can you claim on your Critical Illness Policy?

Generally you can only claim once, with some providers offering policies allowing for multiple claims, but these will come at a higher cost.

Do I pay tax on the benefits of Level Term Critical Illness Insurance?

When you pay for a critical illness policy, any payout you may receive will be completely tax-free. From HMRC’s point of view you have already paid taxes on what you’ve used to pay for this protection/insurance and therefore it is yours tax-free.

If I don’t claim do I get any money back on a Level Term Critical Illness Cover?

No. Your critical illness policy is taken out to provide cover over a set period of time should you experience any ill health, accidents or sickness which is covered under your particular policy, and does not act as a savings/investment fund.

Should I speak to an adviser for my Level Term Critical Illness Insurance?

Speaking to a qualified and regulated mortgage and protection adviser is definitely advantageous if you’re unsure what cover is suitable for you.

An adviser will have a great understanding of the market and which insurance provider(s) will be more willing to accept you for your particular needs.

An adviser will also ask a series of questions to determine which protection type is most appropriate to you.

Although all of the companies that provide critical illness insurance provide you with protection in this area, not all policies are created equally. There are different definitions for the same type of critical illness. With one company you could have a successful claim on diagnosis. However, with another you would not be entitled to anything.

An adviser will be able to have a conversation with you about the areas that you feel are most important for you to cover with the definitions you’re happy with. There will often be a trade-off between price and the quality of protection you receive. This will mainly depend on budget and affordability.

You can get protection by going online, but often when people do this there are either going for the cheapest or most expensive, thinking they are doing the right thing for themselves but may find that when they actually need the cover they do not qualify for a claim.

When it comes to critical illness cover it is better to speak to an adviser and with one that can show you the differences in the potential definitions between policy providers, and likely-hood of making a successful claim upon diagnosis.

What protection do I have if I receive advice from You 1st Mortgages?

We’re here to explain the terms you may be unsure of.

We will request quotes from leading home insurers based on your needs.

We will advise you to what in our expert opinion is the best product for you, taking into consideration, affordability.

If you have any queries, we will answer them.

If you need assistance with a claim, we will help.

We will arbitrate on your behalf if you don’t get the decision you were hoping for when you put in your claim.

We will stand by our advice. We will stand by you. We will put You 1st.

We take pride in providing the most appropriate advice to you, and to protect you and ourselves, we operate as a regulated firm under PRIMIS & The Financial Conduct Authority(FCA). This in turn provides you with several options of recourse in the case that you feel you have been wrongly advised.

What is the difference between a Critical Illness and a Terminal/Chronic Illness?

Within the UK a Chronic/terminal illness is one which the policyholder is expected to die within 12 months. This differs from a critical illness which refers to a specified illness, injury or medical episode.

THESE PLANS TYPICALLY HAVE NO CASH IN VALUE AT ANYTIME AND COVER WILL CEASE AT THE END OF THE TERM. IF PREMIUMS CEASE, THEN COVER WILL LAPSE.

IF THE POLICY HAS NO INVESTMENT ELEMENT THEN IT WILL HAVE NO CASH IN VALUE AT ANY TIME AND WILL CEASE AT THE END OF THE TERM. IF PREMIUMS ARE NOT MAINTAINED, THEN COVER WILL LAPSE.

CRITICAL ILLNESS PLANS MAY NOT COVER ALL THE DEFINITIONS OF A CRITICAL ILLNESS. THE DEFINITIONS VARY BETWEEN PRODUCT PROVIDERS AND WILL BE DESCRIBED IN THE KEY FEATURES AND POLICY DOCUMENT IF YOU GO AHEAD WITH A PLAN.