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Critical illness cover explained

Why it makes sense for GPs to take out this insurance and choose a suitable policy. By Phil Mileham

Conditions that may be covered include kidney failure and paralysis (Photograph: SPL)
Conditions that may be covered include kidney failure and paralysis (Photograph: SPL)
A critical illness policy is cover that will pay out a tax-free lump sum if you are diagnosed with a pre-defined condition, even if you are able to carry on working.

The cost will largely depend on the amount of cover you buy and factors including your age and health.

What it is for
It is up to you how you spend this money. You could consider paying off your mortgage or other outstanding debts, taking a holiday to convalesce or investing it for future income.

Or, if you were diagnosed with a degenerative illness, you could use the lump sum to adapt your home to make life easier.

However you decide to use the money, a critical illness policy can help remove financial worry at a time when you have more pressing concerns.

What it covers
Policies will typically cover some forms of cancer, terminal illness, heart attack, stroke and multiple sclerosis.

A range of other conditions may also be covered including kidney failure, paralysis and early onset of Alzheimer's or Parkinson's disease.

A comprehensive policy should cover at least 25 conditions, although some cover almost 40. Some policies will also cover your children up to age 18.

The cover will usually contain a feature known as total permanent disability (TPD). It pays out if you are unable to work due to an illness or accident not covered in the standard list of conditions, if you are incapable of ever working again.

As a GP, in most cases you need a TPD that relates to the ability to carry out your specific job. However, you should check that the provider does offer what is known as an 'own occupation' definition.

GPs doing some elements of minor surgery, for example, might find that some providers will not offer them this.

Finding the right policy
The Association of British Insurers (ABI) has guidelines on what should be covered including definitions of illnesses and their severity. Most insurers follow these guidelines but do check the policy small print first.

A financial adviser who understands your profession and the benefits available from the NHS (sick pay, for instance if an employee and NHS Pension Scheme for ill-health retirement) can help you choose a policy that meets your needs and avoids paying for cover you do not need.

The above does not constitute financial advice and is for general information only.

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