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How much critical illness cover do I need?

“How much critical illness cover do I need?” It’s a crucial question when you are considering your future financial security. And one that we hear a lot as a financial planning organisation. The answer, of course, is different for everyone. But here’s a process that will help you settle on the figure that’s right for you.

If you lost your income, how much money would you need to live comfortably?

It’s very difficult to contemplate your own innate frailty. Especially when you feel energetic and healthy. But the fact is that nobody is invincible. And when you are considering how much critical illness cover you may need, it’s important to try and put emotions aside and think analytically.

Being diagnosed with a critical illness could leave you unable to work while you receive treatment and recuperate. It may mean you never work again. At least not in the same capacity that you are currently used to.

As a starting point, it’s useful to consider the following questions:

  • Would you be able to generate income during your illness?

  • Would you have to make alterations to your home because of your illness?

  • Do you have a good support network or would you require carers to help you during a complicated recuperation?

It’s all about asking yourself some careful questions to remove the guesswork and zero in on a lump sum that is most likely to be a good fit for you and your circumstances. Absolute certainty is impossible. But by considering the sections below, you can make a highly educated estimate as to how much critical illness cover you might need if something unexpected happens with your health.

Calculate your monthly overheads  

Being diagnosed with a serious illness can bring your life to a sudden standstill. Unfortunately time continues to march on regardless. That means monthly overheads like mortgage/rent payments, loan repayments and phone bills all need to be met. Calculate the total of your monthly overheads, factoring in the repayment term of any loans that you are paying off. Your monthly overheads will decrease as you pay off debt. You should also factor in cost-of-living expenses such as TV and internet, groceries and utility bills.

Do you have any dependants?

If you have children or relatives that are financially dependent on you, calculate how much money they will need to maintain their current lifestyle as well as the estimated length of time that you expect to be supporting them financially.

The cost of treatment and recovery

You may wish to consider the potential cost of private medical expenses and aftercare as well as the cost of travelling to receive treatment.

Subtract your income and savings

The next step is to calculate your savings as well as any passive income you could expect to receive while you are unable to work full-time. That could be from investments, royalties or money that is owed to you. Subtract your savings, potential income and any state benefits that you may become entitled to from the amount of critical illness cover you require.

Don’t forget about offsetting inflation

Critical illness cover is one of those policies that you hope you never have to use. But it’s worth considering that if you did need to call on your policy, that may not happen for many years. Health naturally deteriorates as we get older. And the value of your cover will too unless you account for inflation.

For example £80,000 may seem like plenty of money to cover you if you became critically ill today. But if you came to claim the same amount fifteen years from now, the effect of inflation would mean your lump sum wouldn’t stretch nearly as far. The good news is you can offset inflation by looking for critical illness cover with an indexation option.

Thinking about the future isn’t easy

Hypothesising about your future financial security isn’t easy – especially when you are speculating about your future health at the same time. For the really important financial decisions, it’s often reassuring to sit down with an independent financial adviser who can help you to consider your options carefully. That way you get the peace of mind that you have the necessary security in place if the unexpected happens.

If you would like an initial discussion with one of our experienced financial planners, please get in touch for an informal discussion about how we could help you make your decisions with confidence. Contact Us This article was written by Paul White.


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