You can’t predict a critical illness, but you can be better prepared and protect yourself and your family financially with critical illness insurance.
Critical illness: some statistics
It’s easy to persuade ourselves that we won’t be the 30-something breast cancer victim or the super-fit 40-something struck down by an unexpected stroke, but the reality is that critical illness doesn’t discriminate by age, sex, or nationality.
- According to figures from the Association of British Insurers (ABI), critical illness claims reached a record £1.2billion, up £136 million (13%) on the previous year. The number of claims also rose, by 10%, with the average claim in 2023 totalling £67,267. – 136Billion?
- The most common cause for claims in the UK was cancer – no surprise there – with cancer claims costing insurers £777 million.
- In the US, the rate of new cases of cancer (cancer incidence) is 445.8 per 100,000 men and women per year (based on 2018–2022 cases).
- There are an estimated 18.1 million cancer survivors in the US, a figure projected to reach 26 million by 2040.
- The risk of certain critical illnesses, such as stroke and 17 types of cancer, in younger people of working age is rising. The incidence of stroke in US adults between the ages of 45 and 64 rose 15% over the last decade.
The statistics show that none of us are immune to critical medical conditions at any stage of our lives. But the good news is that medical advances mean that the chances of surviving critical illness or injury are increasing, especially for those who are younger and generally in good health. However, could your finances survive?
Recovery can often take time, and cost money, and that’s where critical illness insurance comes in.
What is critical illness insurance?
Critical illness cover is an insurance policy that pays out a tax-free cash benefit if you are diagnosed with one of a list of specific medical conditions or injuries listed on the policy. Usually these would include the big three – cancer, stroke and heart attack – along with many other debilitating illnesses such as multiple sclerosis or organ failure (usually around 40 to 50 conditions, depending on the policy). Certain policies will also pay out if you are permanently disabled as a result of either injury or illness.
Critical illness insurance pays out once and then the policy is terminated.
Why do I need critical illness insurance?
The diagnosis of an unexpected illness such as cancer or heart disease is stressful both physically and emotionally. The last thing that you need on top is financial pressure. Expatriates are often worse hit at these times without family close by to rely on in times of need.
You can’t predict a critical illness, but you can protect yourself from the financial impact it may have on your or your family enabling you to focus on recovery without worrying about money.
Rather than fretting over how you are going to cover day to day living expenses, childcare costs, deductibles, help around the house and/or the cost of care and recovery, you will receive a lump sum that can cover these costs without using up your savings. Your insurer will provide essential financial support when you need it most so you and your family can keep your savings intact while maintaining your standard of living.
This additional level of financial protection can make a huge difference when you and your loved ones need it most.
Key considerations when choosing critical illness insurance
Pre-existing conditions – Most polices will not cover you for any pre-existing conditions which you knew about when you took out the policy and will apply an exclusion to this effect. This is one reason it makes sense to take out a policy while you are still young.
Risk factors – Insurers look at family history, smoking and body mass index when assessing the risk so expect to pay more if you have a family history of cancer, stroke or heart disease, if you smoke or if you are overweight.
Exclusions – If exclusions apply, you may be able to choose between accepting them, or opting for a higher premium to eliminate them.
Waiver of premiums – It is possible to include a clause to ensure premiums will be paid for you if you are unable to work due to ill health.
Fixed or renewable premiums – Fixed premiums offer security so you know what you will be paying in the future. Renewable premiums may be less expensive in the short term but will rise as you get older and present a higher risk.
Specific liabilities – You can choose to link cover to specific liabilities such as paying off a mortgage.
Total Permanent Disability – Policies with this clause mean that you will receive a lump-sum payment if you are permanently unable to work due to illness or injury. This can be particularly important for expats who may not have access to local disability benefits or social safety nets in their host country.
Currency and claims payout – Ensure the policy pays out in a stable currency that aligns with your financial needs. If your expenses or debts are in your home country, check if the policy allows for claims to be paid in your home currency or if currency fluctuations could affect the payout value.
Portability – As an expat, you may relocate during the policy term. Make sure the policy is portable and will remain valid if you move to another country or return home. Some policies become void if you leave the issuing country.
Local vs international providers – International insurance providers often offer greater flexibility, multilingual support, and portability, whereas local insurers may have more competitive pricing but limited coverage outside the country of issuance.
Survival period – Critical illness policies often include a survival period clause, meaning you must survive for a certain number of days (typically 14–30) after diagnosis to qualify for the payout.
Medical definitions and claim process – Definitions of critical illnesses and requirements for diagnosis can vary by insurer and jurisdiction. Carefully review what constitutes a valid claim and what documentation is needed, especially if medical reports are issued in a foreign language.
Indexation clause – increases your cover each year in line with an index (e.g. the retail price index) so that payouts increase in line with inflation.
Benefit and policy term flexibility – some policies allow benefit flexibility with the option to increase or decrease cover or alter the duration of your cover if your circumstances change.
Guaranteed insurability options – These allow you to increase cover at particular times without needing a further medical.
Other additional features – Different insurers may offer different benefits such as discount for exclusions, critical illness buyback, annual health checks and claims support helplines.
Help choosing critical illness insurance
With so many options, it isn’t always to select the right critical illness insurance to protect you and your family. That’s why we advise seeking the advice of a professional financial consultant with expertise in the insurance options available to expats. At Infinity, we have partnerships with many major insurers but are tied to none so we can give you objective advice in comparing policies and terms.
The financial impact of a critical illness diagnosis can be devasting, adding stress to already-traumatic situations. Critical illness insurance can play a crucial role in supporting you and your family financially when you need it most.
To ensure your loved ones are protected to the max, why not get in touch and discuss your requirements with one of our experts today?
A leading provider of expat financial services and wealth management services across Asia.
