As a contractor in the UK, you have the flexibility to choose your work hours, but it also comes with risks. If you fall ill, it can significantly impact your financial situation. Critical Illness Cover is designed to help you maintain your financial stability, even in difficult times.
Unlike employees, contractors don’t receive statutory sick pay (SSP), making it crucial to have critical illness insurance in place. A critical illness policy provides a lump sum payout on the diagnosis of specific illnesses, allowing you to focus on recovery without worrying about your finances.
How much I can borrow calculator
Mortgage Calculator
Why You Need Critical Illness Cover as a Contractor
As a contractor, you have the ability to work independently, but you also face unique challenges regarding financial security. Critical Illness Cover offers protection against unforeseen circumstances, like serious illnesses that can leave you unable to work. Common conditions covered include heart disease, cancer, and strokes. With modern medical advances, many of these illnesses are treatable, but they may still leave you facing a reduced ability to work.
Without the benefits of permanent employment, you are responsible for your own income protection. This can be a significant financial burden if you suddenly face illness, as the costs of daily living continue despite your inability to work. By securing critical illness insurance, you can mitigate this financial strain, ensuring you have the support you need to recover.
How Critical Illness Cover Works for Contractors
Critical Illness Cover functions similarly to life insurance, but it pays out a lump sum when you are diagnosed with a covered illness. This lump sum can be used to pay off mortgage repayments, adapt your living environment to meet your medical needs, or fund rehabilitation costs. You won’t have to repay the payout even if you recover from the illness, providing peace of mind.
Having a critical illness policy gives you financial flexibility. It helps you maintain your lifestyle while focusing on recovery, ensuring that you don’t face financial hardship in addition to your health issues.
Critical Illness Cover vs. Income Protection
While both Critical Illness Cover and Income Protection serve to protect you financially, they operate differently. Income Protection provides a monthly payout if you’re unable to work due to illness or injury, but it stops once you return to work.
On the other hand, Critical Illness Cover provides a lump sum payout, regardless of whether you fully recover or not. This means you can use the money to adjust your life and work schedule to accommodate any changes brought on by your illness. Unlike Income Protection, which stops once you’re considered well enough to return to work, Critical Illness Cover supports long-term financial stability during and after your recovery.
What to Look for in a Critical Illness Policy
When selecting critical illness insurance in the UK, focus on more than just the cheapest option. Look for a policy that offers comprehensive coverage for illnesses that are most likely to impact your life.
Check the medical definitions of the illnesses covered. Some policies may not include certain types of cancer or have complex terms. It’s essential to choose a policy with clear, easy-to-understand definitions that suit your needs.
Also, review the insurer’s reputation for paying out claims. As critical illness policies are based on specific illness definitions, ensure that the insurer has a track record of handling claims fairly and promptly.
Finally, make sure the premium payments are affordable. As you get older, the likelihood of becoming ill increases, so securing a policy that remains within your budget is essential.
Types of Critical Illness Policies Available
There are different types of critical illness cover policies to choose from, based on your needs:
- Decreasing Cover: This type of policy decreases in value over time, typically aligning with the repayment of a mortgage or large debt.
- Level Cover: Provides a fixed lump sum payout for the duration of the policy, ensuring you have consistent coverage for long-term financial protection.
- Family Income Benefit (FIB): Rather than a lump sum, this policy pays out an annual or monthly benefit to your family if you fall ill during the policy’s term.
- Increasing Cover: This policy links premiums and coverage amounts to the Retail Prices Index (RPI), ensuring that your cover maintains its value over time, accounting for inflation.
Add-On: Waiver of Premium Benefit
An additional Waiver of Premium benefit ensures that your premiums are paid if you become too ill to work for six months or more. This is vital, as it prevents you from losing coverage during an extended illness.
In many cases, insurance premiums are the first to be cut when budgets tighten, but having this benefit ensures that your critical illness policy remains in force, even if you can’t work.
Securing the Right Critical Illness Cover
Finding the right critical illness cover for your specific needs is essential for financial peace of mind. Work with a financial advisor or insurance broker to compare different policies, ensuring you receive comprehensive coverage at an affordable rate. Be proactive and secure critical illness insurance today to protect your financial future.