Many of the articles on this website describe the need for Life Insurance or Life Assurance. This article considers other forms of insurance that are based on your life.
Critical Illness Insurance
Critical Illness insurance is a form of Life Insurance that will pay out in the event of you being diagnosed with a specified illness or condition. Each Life Insurance company will cover a different combination of illnesses and conditions, but the most common include:-
- Heart Attack
- Some forms of Cancer
- Kidney disease
- Liver disease.
The exact conditions covered vary between Life Insurance companies, so you will need to look at the policy summary and conditions carefully. These documents will also give details on how they assess the conditions when a claim is made.
This form of insurance can be a stand alone policy or be included as part of a standard Life Insurance policy.
Permanent Total Disability
Permanent Total Disability insurance is usually an additional option to a standard Life Insurance or Critical Illness policy. It is not common to be able to buy it as a stand alone policy.
This type of policy will pay out if you are permanently disabled or require assistance in performing a specified number of Regular Daily activities such as eating or washing yourself. The policy summary should detail the number and describe the activities that will be covered.
Permanent Health Insurance
Permanent Health Insurance (also known as Income Replacement Insurance) will pay a regular monthly income for a specified period of time or to an agreed age in the event of long term illness or disability. This form of Life Insurance is the only one that a single person without a mortgage is most likely to need.
The amount of cover is usually restricted to 75% of your gross income less any state benefits or other income received. The income will start after an Elimination Period in which no income is paid. The elimination period (usually 3, 6 or 12 months) should coincide with the time that any employer’s sick pay runs out. In the event of a claim, the income will continue to be paid until you are able to return to work or until the period it is paid ceases.
It is necessary to read the policy summary to make sure that you understand the exact definition of some of the terms used in the policy.
Payment Protection Insurance
Payment Protection Insurance is a simple policy associated with a loan or credit card that will repay the loan in the event of your death. Often included in the policy is the facility for the insurance company to make the minimum credit card payment (or an agreed amount) in the event of sickness or unemployment. In the event of unemployment there will be specific exclusions that should be explained to you before you take the policy out. Most policies are for a fixed term and can be renewed at the then current premiom.
In the past these policies were very difficult to make a claim on. However, because of action by the UK regulator, the policies are much more specific in what can and cannot be claimed, and elements (such as unemployment cover) do not have to be purchased.
This article is for guidance only and must not be construed as advice. The contents of this article are aimed at the UK market, although many countries will have similar policies available. If you need advice you should refer to a Financial Adviser.