As a contractor you have the ability to enjoy the benefits of your income and flexibility without the restrictions of permanent employment, but it is important to consider what would happen if you are diagnosed with a critical illness and you no longer have the security of a permie package. How will you be able to protect your current lifestyle and the financial wellbeing of your dependants?
A critical illness policy works in a similar way as a Life Insurance policy as it will pay out a tax free lump sum but with this cover it will be on diagnosis of a serious illness rather than on death so you can use the policy to clear your mortgage or other debts or fund changes to your lifestyle and you will personally see the benefit of your policy. The good news is that even if you fully recover from the condition you will not have to pay back the lump sum.
What to look for in a Critical Illness Policy
A Critical Illness Policy can be personalised to your needs and our specialist advisers will discuss the various options that you can choose from before searching for the ideal policy for you. You will need to consider the following:
- Understand the medical definitions of what is covered, these must be comprehensive to be of use to you in the event of a claim
- Check the affordability of the policy so that you can maintain the payments especially, as you age. There is little point in taking out a policy while you are young and being forced to cancel it as you get older and are more susceptible to critical illnesses.
- Consider the duration of time you would like the policy to cover i.e. until your children are independent. It is also important to inflation proof your policy so that it holds its monetary value for the duration of the policy term.
Types of Critical Illness Policy
- You have an option to either cover yourself for a fixed term or for the whole of your life
- There is also an option to take a decreasing amount of cover (Decreasing Term Assurance) that will reduce in line with a liability such as a repayment mortgage, or Level Term Assurance which offers a constant level of cover for an interest only mortgage for example
- An additional Waiver of Premium benefit is recommended ensuring that premiums are maintained by the insurer if you have suffered a less serious illness that has meant you are unable to work for 6 months or more
Contractors often choose to take out a combined policy to cover life and critical illness cover, as this can often be a cheaper option than arranging them separately. Our award winning advisers can discuss your cover requirements and suggest a policy that is most suitable for you.
To find out more and speak to an adviser call 0333 370 8888 or fill in a contact form.