Critical Illness Reviews

The most common answer to this is the guaranteed immediate annuity, which is payable for a fixed number of years and thereafter until critical illness. The payments continue for the specified period whether the annuitant lives or not, and if he dies the money will be payable to whoever he has named in his will. The amount of the annual payment per £1,000 of purchase money is of course lower than for a non-guaranteed annuity.

Under a capital-protected immediate annuity, there is a guarantee that the total gross installments payable will not be less than the purchase price of the annuity. In the event of critical illness before the full amount has been received, the balance is generally payable as a lump sum.

Very often, of course, it is a married couple who are seeking to augment their retirement income. In this case the most suitable alternative is usually the immediate joint critical illness insurance. Here, payments continue until the second partner has contracted a critical illness, and the rate of payment will depend on the partners’ ages (more rarely used is the joint life cover, where payments cease on the first claim). Such critical illness insurance annuities are, of course, even more vulnerable to inflation and the survivor may be left with a quite inadequate income. So care is necessary in making such an arrangement.

The problem of inflation can be partly surmounted, but only at the expense of the original income. Some offices offer increasing annuities, where the annual payment increases by a fixed percentage or amount each year. Provided the annuitant is prepared to sacrifice part of the original income and expects a long life, this may be a worthwhile alternative to the ordinary annuity method.

Because a considerable period has to elapse before escalating annuity installments will match those which would have been available under a level annuity, it is often preferable to buy the smallest acceptable level annuity and to retain capital which can be used to buy further policies later, when the purchaser is older.

A Limited number of companies will offer to include the reinstatement option. This reinstatement option can be added to a critical illness policy at an additional premium. Having reinstatement on your policy means that you can acquire a new policy with limited cover after you have made a successful claim from your provider. Typically this limited cover includes, Aorta Graft Surgery, Aplastic Anaemia, Bacterial Meningitis, Cancer – excluding less advanced cases, Cardiomyopathy, Heart Attack, HIV Infection, Kidney Failure, Liver Failure, Major Organ Transplant, Motor Neurone Disease, Multiple Sclerosis, Parkinson’s disease, Stroke, and Third Degree Burns.

This can only be done so between 12 and 24 months with your provider, after successfully making a claim. The new policy will have maximum benefit equal to your current policy minus cover of which was provided under any replacement option, the cover will also not include any pre-existing condition before that start of the new policy.

You should always check your policy before commencement to establish if the reinstatement option is available and if so, is it automatically included.