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Life insurance and critical illness

Life insurance and critical illness

25 Aug 2021

Life insurance and critical illness - name a more iconic duo. This life insurance dream team is designed to cover all bases. Protection for you and your family if you become seriously ill and protection for your family if you pass away. 

After all, developing a serious medical condition and/or passing away are arguably two of the worst things that can happen to us. Therefore, investing in an insurance product that provides you and your family with a financial safety net in very difficult times just makes total sense. 

That’s why many people choose to take out some form of combined life insurance and critical illness cover. This also tends to be cheaper than buying the two products separately. If you are thinking of taking out a combined life insurance and critical illness policy, however, there are some things you should be aware of.

What’s the difference between life insurance and critical illness?

We’ve touched on it above, but let’s just go into a little more detail about how each of these life insurance products worked. Life insurance pays a cash lump sum to your family if you pass away within the policy term. 

The money is passed to your beneficiaries to use however they choose to. Commonly, payouts are used to pay off the mortgage, pay rent and utilities, pay off outstanding debts and simply put aside as inheritance.

The biggest difference between these two products is that critical illness cover will not pay out upon you passing away. Instead, critical illness has you covered for many serious illnesses and pays out a lump sum payout if and when you are diagnosed, or if your illness reaches a certain level of severity within the term of the policy. Some policies can also pay out if it’s your child that becomes seriously ill.

Combined life insurance and critical illness 

It’s important to point out that when it comes to combining life insurance and critical illness, different insurers have different ways of doing things. Not all policies of this kind will be the same. 

While some combined policies treat the two areas of coverage as separate, meaning you can claim for both at different times, others only enable you to claim once. So, if you claim for the critical illness part of your policy first, the policy will then end. This means you won’t be able to then claim for the life insurance part later down the line. 

This is why you often pay less for a combined policy than you would for two separate policies. Make sure that you are 100% aware of what you are buying into and that you understand your lender’s stance on this. 

Buyback options

If two insurance products but only one payout isn’t quite what you had in mind, you could explore a buyback option. This enables you to purchase a new life insurance policy if you do one day end up making a successful critical illness claim. 

The great thing about a buyback option is that it gives you an avenue for getting some extra cover at a time when other providers perhaps wouldn’t accept you for cover due to your recently diagnosed medical condition. 

Or, a final option is to simply take out two separate policies and pay out a little bit extra each month to cover both sets of premiums. This way, you’ll have all the peace of mind you could possibly want regarding financially safeguarding your family’s future and a little flexibility of perhaps buying one policy now and the other a little later down the line when finances may be a little more comfortable. 

When it comes to life insurance and critical illness, you have a few options available to you. If you are unsure about which will be best, then speak to us here at LifeSearch. We’re experts in this kind of thing! We’ll help you select the right kind of policy combination for you and your family. 

Talk to one of our experts today on 0800 316 7253 and let’s get you covered in a way that suits you.

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