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Determining the appropriate amount of Critical Illness Cover is crucial for ensuring financial security during a serious health diagnosis.
But how can you work how much Critical Illness Cover you need? Here’s a detailed guide to help you figure out how much Critical Illness Cover you need.
Critical Illness Cover
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What is Critical Illness Cover?
Critical Illness Cover is an insurance policy that pays out a tax-free lump sum if you are diagnosed with one of the serious illnesses listed in the policy.
Commonly covered conditions include cancer, heart attack, stroke, and multiple sclerosis. This financial support can be used for anything, from medical bills and rehabilitation costs to mortgage payments and daily living expenses.
Evaluate Your Financial Obligations
Start by examining your current financial obligations. Consider the following factors:
- Mortgage or Rent: Ensure you have enough cover to pay off your mortgage or maintain rental payments.
- Living Expenses: Calculate your monthly living expenses, including utilities, groceries, transport and other essential costs.
- Debts: Include any personal loans, credit card debts, or other financial liabilities.
- Dependents: Consider the financial needs of any dependents, such as children or elderly parents, who rely on your income.
Consider Your Health and Family History
Your personal health and family medical history play a significant role in determining the amount of cover you need.
If you have a family history of critical illnesses, you might want to opt for higher coverage. Additionally, consider your own health status and any existing conditions that might increase your risk.
Calculating the Right Amount
While individual needs vary, a common recommendation is to have Critical Illness Cover equal to two to five times your annual income.
This ensures that you have enough financial support to cover several years of expenses during treatment and recovery.
If you want to calculate the right amount of Critical Illness Cover, you are best speaking with an insurance specialist. At UK Moneyman, we offer a free insurance review to every customer. Whether you have an existing policy in place or are looking to take out a Critical Illness Cover Policy, we would be more than happy to help!
Do I need Critical Illness Cover if I have Life Insurance?
Yes, Critical Illness Cover and Life Insurance serve different purposes. And, yes, you can have both policies at the same time.
Life Insurance provides financial support to your beneficiaries in the event of your death, whereas Critical Illness Cover provides a lump sum payment to you if you are diagnosed with a serious illness.
Having both ensures comprehensive protection.
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Can I change my Critical Illness Cover amount in the future?
Many policies allow you to adjust your coverage amount as your needs change.
This can be useful if your financial obligations increase, such as taking on a larger mortgage or having more dependents.
We would recommend speaking with an insurance specialist if this is something that you are looking to do with your Critical Illness Cover.
Is there an age limit for Critical Illness Cover?
Most insurers have age limits for purchasing Critical Illness Cover, typically between 18 and 65 years old.
However, coverage can often be maintained until you reach a certain age, such as 70 or 75, depending on the policy and the insurance provider.
Be wary that your Critical Illness Cover premiums will likely go up the older that you are.
