Serious illness insurance

Serious/critical illness cover is an insurance policy that pays out a tax-free lump sum if you are diagnosed with one of the specific illnesses or disabilities that your policy covers.

It is often confused with income protection insurance (or permanent health insurance, as it’s sometimes referred to).

But it’s important to remember that if you get sick and are unable to work, serious illness insurance will only pay out if the illness is covered by the policy.

The illness you end up suffering may be serious enough that it would prevent you from working, but may not be covered by your policy.

Even when the illness is covered, the policy pays a once-off lump sum and not an ongoing income.

It is often sold as an add-on to life insurance or a mortgage life protection policy. If you do buy it as an add-on, the cover usually reduces over a chosen period of time by a specified interest rate, usually in line with your mortgage.

If you buy it on its own, the cover stays at the same level for the term of the policy.

Your children may be covered for most of the serious illnesses listed on your policy, and sometimes for other child-related illnesses, such as meningitis.

How much you pay for the policy depends on a number of factors, but the most important are:

• The amount of cover
• Who the insurance covers – you, you and your partner, or you and your family
• How long the policy lasts
• If you are a smoker
• Your age (the older you are the more expensive your insurance will be)

The maximum benefit for a child's claim depends on the policy, but it is usually no more than 50% of your cover, up to a maximum of about €15,000.

There are a number of extra benefits available with some policies, but this will usually cost more.

Contact your independent broker for more information and advice.

Information correct as of 19 May 2010