Estimated Reading Time: 3 minutes
No one thinks that they’ll succumb to a life-threatening illness. The fact is, we’re human and every one of us is as susceptible as the next person. For contractors, protecting their livelihood should critical illness strike is paramount.
Due to their higher earning potential, independent professionals are often the family’s main breadwinner. Without their income, a whole household’s financial stability is threatened.
But contractors can now safeguard their livelihood if they’re sidelined by serious ill health. What’s more, policies are available that pay out purely on diagnosis.
Tranquility | Therapy Money Can’t Buy
If you’re diagnosed with a serious condition, the last thing you want to worry about is your legacy. You want to focus on getting better. Critical illness cover for contractors has improved a great deal in recent times to that end.
Many serious illnesses and diseases are more treatable than at any time in history. As such, the chances of us surviving cancer and other critical diseases are a lot higher.
Survival, however, may not mean that a return to work is feasible. Especially for limited company contractors, where medical advice deems running a business off limits.
With the guarantee of a lump sum payment upon diagnosis, post-op comfort is one less concern.
Do I Need Critical Illness Cover if I’ve got Income Protection?
You may already have an income protection policy in place and think critical illness cover is a bit OTT. If your mortgage is all paid up and you have no dependents, you could well be right.
The difference is, income protection has a ‘sell-by date’. With IP, there’ll come a time when you have to return to work or draw your pension early.
That decision to return to work may not be at your discretion. If you’ve not chosen a contractor-specific policy, your insurer may refuse to pay benefit if you refuse to take a more menial job.
Critical illness cover eliminates that possibility and puts you in the driving seat. Your lump sum is in your bank account, whatever.
Your partner has to give up work to look after you? They can.
Home improvements to accommodate enhanced accessibility? You can stretch to it.
Money in the bank to repay the mortgage? You can cover that, too.
Critical illness cover: the checklist
There are all types of cover on the market, just as there are hundreds of providers. The premiums can vary, too. But do bear in mind, you get what you pay for.
Basic policies can cover far fewer scenarios, so it’s important to check what’s covered. This could include limitations on:
- the types of condition covered;
- pay outs and their ability to stand up to inflation;
- when a payout is triggered (and what it can be used for);
- what happens in the event of a full recovery;
- the insurer themselves – what do your peers say?
For guidance on what is relevant to you, an experienced IFA can point you in the right direction. It’s easy to get lost and if you choose an inadequate policy, it’s too late to do anything about it once you become ill.
It’s your cover, your premiums. An experienced contractor advisor will make sure you’re getting your money’s worth.
Cover on your terms
A one-off lump sum upon diagnosis is not the only way you can approach serious illness cover.
If you want cover only up to a certain date or milestone, you can. The milestone could coincide with your children’s graduation, paying off a mortgage or retirement.
We call this type of cover term insurance, where you set the term of cover. This also gives you the flexibility of choosing a reducing payment. Known as ‘decreasing term assurance’, the closer you get to the end of the term, the less your premiums and lump sum cover.
Again, there are options with how you receive your pay out. The most popular is the lump sum. But you can also choose to have annual payments. This removes the temptation of squandering the benefit ‘because it’s there’.
The alternative to term assurance is Whole Life cover. This is cover that will protect you up to the point you depart our mortal realm.
There’s a lot to take in with critical illness cover, especially for contractors who have a business to run. Our experts are well versed in all aspects, many having policies of their own.
If covering your family’s livelihood in the event of severe illness is important to you, we’re here to help. Independent, unbiased advice, tailored to let you get on with running your business.