What is life and illness cover
Life and illness cover is designed to give you peace of mind, as it pays out a lump sum if you were diagnosed with a serious illness or die. You can use this money to help pay off debts, such as your mortgage or credit cards, or to cover day-to-day expenses, like the kids’ school fees.
>You should consider taking out life and illness cover if you have people who depend on you financially – family members who rely on your income to survive. If you don’t have these people in your life, then you might not need life and illness cover.
How does it work?
Life and illness cover works in a way that’s specific to each policy. But it can be useful to have a general idea of how the policy would work.
The life and illness cover is part of your insurance policy. It’s there as protection against something bad happening, such as an accident or critical illness. If something happens, you will get a lump sum payout from the insurance company.
The amount you get depends on what you agree with the insurer when setting up your cover. Your options are usually:
- One-off monthly payments to help with day-to-day costs (mortgage, bills and living expenses) for a set period of time
- A lump sum which can be used for any purpose
Should I buy life and illness cover?
Life and illness cover can be a useful form of financial protection for you and your family. Whether it is right for you depends on your circumstances. For example, life and illness cover could provide financial protection for your family if you fall ill or die.
If you have a mortgage, life and illness cover may be a good idea as it could repay what is outstanding on the mortgage when you pass away, preventing your dependents having to find the money themselves from their other income or savings. If you have dependents who would struggle financially if something happened to you, life and illness cover can also provide them with an amount of money that could help meet the cost of bills or help them maintain their current lifestyle until they are able to return to work or have finished their education.
How much does it cost?
The cost of this cover will depend on your age, your health and lifestyle as well as how much you earn and the type of cover you want.
It is usually sold as a benefit on a salary or as a stand-alone policy and premiums are usually paid monthly.
It can be more expensive if you are older or have a medical condition.
But getting it when you are young and healthy means that it will be cheaper in the long run – the younger you start, the cheaper it is.
Does life and illness cover protect me for as long as I live?
No. Life and illness cover is available for a limited time because of your age and health condition. The age limit varies by insurer, but typically you can’t get life and illness cover after you turn 65. In most cases, you can only get life and illness cover if you are healthy at the time of application so that insurers know they will be able to pay out a claim if the worst happens.
If you wait until later in life to take out life or illness cover, it is likely that your premiums will be higher than if you’d taken out your insurance earlier in life – especially if there are certain health conditions or illnesses in your family history.
Many people who are sitting on some savings or assets have bought life and illness cover.
This is a question many people who have savings have asked. The answer is generally yes, you should consider buying some form of life and illness cover, but it isn’t as simple as it seems. In some cases, life and illness cover might not be worth the money you’re paying for it.
First of all, what are you trying to do? If you want your assets protected in the case that either of you gets sick or dies, then a term life policy (or whole-of-life policy) is probably going to be the best choice. These policies usually come with an increased premium over a standard term life policy but they will also provide much higher levels of protection against the risk of death or illness. They do this by providing additional benefits such as hospital and medical insurance in addition to funeral and burial costs in the event of death whilst also having extra income for your dependants (such as children) if both partners die before retirement age.
If you don’t want your savings protected in the event that one or more parents/spouse get sick or die but instead just want to pay lower premiums on your policy because you know there’s very little chance that one will ever get ill then a cash-value policy might be more suitable for you. This type of insurance doesn’t protect against sickness or death so there’s no need for any kind of funeral benefits; its purpose is simply to provide some income every year if either parent/spouse passes away early enough before they reach retirement age so that their dependants can continue living off them during their retirement years.
It’s important to note though that these two situations aren’t mutually exclusive; many people buy both a whole-of-life policy and cash value policy which means they’re effectively taking out two policies to achieve the same result -though obviously at different levels depending on how likely each person thinks their spouse will fall ill/die!