Remember being 14 or 15 in maths class in school?
Your teacher, probably a bit of a gowl, would spend ages explaining complicated formulas on the board, and then heād ask you if you understood.
You probably didnāt, but you said āyesā anyway because you didnāt want to look stupid.
Next thing you know, Mr McGowl has asked you to come up to the board to solve an equation for āxā. You couldnāt find that āxā if it was inscribed onto your forehead.
And all you can do is go up there and write some crap on the board while Mc Gowl tuts away.
The insurers quite often play this game when they name and explain things.
Even with the best intentions (Iāll let you consider how true that might be), they have a way of explaining things so that you canāt figure it out.
An example?
Which is also called Critical Illness Cover.
And Specified Illness Cover.
Itās all the same thing.
But then it gets nuttier.
Youāve also got a choice between
Are you tracking how many variables of the same thing that adds up to?
Itās more than you can count on one hand ā but itās actually only three different types of the same thing.
McGowl strikes again.
Serious Illness Cover, also known as Critical or Specified Illness Cover (because why have one name when you can have three?), is an insurance policy that says, āIf you get sick with one of the specific illnesses we’ve listed ā think of the big, scary ones like cancer, heart attacks, or strokes ā weāre going to give you a lump sum of cash.
For the sake of my typing hands and sanity, weāll just call it Serious Illness Cover from now on in. Good?
Good.
At its simplest, Serious Illness Cover (and all its subtypes) pays you a tax-free lump sum if you get sick with one of the illnesses named in your policy.Ā
To explain, letās play a game called āWill It Pay Out?ā – Serious Illness Cover edition.
Itās a bit like āDeal or No Deal,ā but instead of briefcases, we have illnesses, and instead of Noel Edmonds (or Stephen Mulhern for our younger viewers), you get me.
So, letās say you buy serious illness cover in Ireland.
Your policy has a list of illnesses longer than a Dublin taxi queue at 3 a.m. These are your covered illnessesāthe ones thatāll make your policy pay out like a Vegas slot machine.
Take heart attacks, the classic. It’s not the nicest topic, but if you have a heart attack as defined in your policy, bingo! Youāre in payout territory. The insurance company looks at your claim, nods, and says, āYes, this is exactly why weāre here,ā and hands over the cash.
This money can be a financial lifesaver while youāre recovering.
Now, on the flip side, letās talk about something less straightforward ā say, a mild form of a non-life-threatening condition, like a very minor stroke or a less severe case of a listed illness.
Remember, your policy has specific definitions of all of the illnesses covered. If your condition doesnāt meet the policyās fine print definition, there is no payout.
The moral of the story? Itās all in the fine print, my friends. Like a good detective novel, the devilās in the details.
If you’re considering serious illness cover in Ireland, know exactly which illnesses are covered.
Itās the difference between a comforting financial pat on the back and a cold shoulder from your insurance when you need it most.
(By the way, you can avoid all this definition mumbo-jumboĀ by choosing Ā Income Protection Insurance instead, but thatās a whole other blog post.)
Let me tell you a story:
John buys ā¬100,000 Standalone Serious Illness Cover, and he suffers a heart attack covered in his policy.
Poor John.
John makes a claim and gets the ā¬100,000 tax-free cash, which obviously helps enormously with his recovery.
His serious illness cover ends, but he doesnāt have to worry about work or money for a bit.
All clear?
Thatās Independent/Standalone Serious Illness Cover in a nutshell.
Your first thought might be,
sure it has āAcceleratedā in the title. It must be class.
The āAcceleratedā has absolutely nothing to do with getting paid faster, so remove that notion from your mind.
Accelerated Serious Illness Cover is a bit like a kangaroo, and it’s Joey.
It’s attached to another policy, usually a Life Insurance or Mortgage Protection policy.
Yes, I know weāre starting to get tangled up with lots of terms here, but remember what I said about confusedly trying to solve for āxā on the blackboard? This is like that.
Now, Accelerated Serious Illness Cover has a hiccup, which weāll get into in a second, but basically, any pay-out will reduce the amount of the attached Life Insurance or Mortgage Protection cover.
Donāt worry; I have examples!
Youāve just taken a slice from your life cover pie.
If your Joeyāsorry, your Accelerated Coverā is attached to Mortgage Protection, it gets more interesting.
So when you buy Accelerated Serious Illness Cover on a Mortgage Protection policy, the actual amount that will pay out could be far less than anticipated.
Itās complicated, so take a minute to reread.
Iāll wait for you.
Additional Serious Illness Cover is more straightforward.
You buy it as an add-on to your Life Insurance cover.
Letās look at John again.
Wait.
Whereās John gone?
JOHN! YOUR DINNERāS READY.
Heās back.
Heās had a rough day, in fairness.
All good there š
If youāre thinking of bundling Serious Illness Cover and Mortgage Protection, donāt do it unless you understand clearly:
If you’re happy with that, then buying accelerated illness cover on a mortgage protection policy is an affordable way to make sure your biggest debt is cleared should you get a specified serious illness.
Buy it on an Accelerated basis but increase your Life Insurance by the amount of the Serious Illness Cover.
Here’s John to explain:
John is deciding whether to go for Policy A or B below.
A) ā¬250,000 life cover and ā¬50,000 additional serious illness cover comes in at ā¬70.37
B) ā¬300,000 life cover and ā¬50,000 accelerated serious illness cover comes in at ā¬69.73
If John contracts a specified serious illness, ā¬50,000 will be paid out on A or B.
If John dies, ā¬250,000 will be paid out on A and B.
For all intents and purposes, the policies are identical.
But what if John dies before he makes a serious illness claim?
Policy B will pay out ā¬50,000 extra in life cover…all for a lower premium.
Yep, it doesn’t make sense. It sounds nutty, but you’re hardly surprised at this stage!
Structuring your policy this way takes advantage of a little-known discrepancy in insurers’ pricing of different types of serious illness cover.
Shhhh, don’t tell anyone.
Letās recap:
= both reduce over time. A pay-out on Serious Illness will reduce the value of the Mortgage Protection cover.
=Ā neither reduce over time. A pay-out on Serious Illness will reduce the value of the Life Insurance cover.
=Ā neither reduce over time. A pay-out on Serious Illness doesn’t affect the Life Insurance cover
= no attached life cover, just Serious Illness. But be aware of the horribly unfair “Survival Period”
A life insurance survival period is the length of time you must live after being diagnosed with a critical illness. The insurance benefit payout will only be made if you live longer than the survival period.
The survival period is usually 14 days, so if you die within 13 days, you will not receive a payout.
Now you know the difference between the types of Serious Illness Cover.
Next, you need to determine how much serious illness cover you need and which company offers the most comprehensive coverage.
Complete the questionnaire below, and l will make a recommendation for you.
I’ll be right back after you complete the questionnaire , or you can schedule a callback here
As Ireland's leading life insurance broker, we specialise in comparing the rates and policies from the top five Irish life insurance providers and offering the very best value quotes to suit the individual needs of our clients. Our expertise lies in finding a suitable insurance plan for those with specific needs, be it a particular illness, occupation or claim history, we've got you covered in every sense!
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