Millions of people develop a critical illness each year. According to Cancer Research, there were more than 356,000 new cancer cases in 2014 (the most recent year for data) alone.
It’s a sobering thought, not just for how you and your family would deal with approaching treatment, but also because of how it could hit you financially.
A new study by insurer Royal London has suggested that more than half of people who have been diagnosed with a critical illness – around 3.5 million people – have also been hit financially, whether from having to take time off work or facing unexpected bills.
So how can you protect yourself?
Statutory sick pay
The first thing to bear in mind if you fall ill is that you should be entitled to Statutory sick pay (SSP). You can get £89.35 per week if you’re too poorly to work, and it is paid for up to 28 weeks.
You need to be off work for more than four consecutive days to qualify, though you will pay income tax and national insurance on the payments.
Shockingly, some employers have been caught trying to get out of paying sick pay when their staff fall ill by Citizens Advice .
Obviously, for many people SSP represents a sharp fall in their usual income, but there are steps you can take to ensure that you aren’t financially wiped out if you are unfortunate enough to develop a significant illness.
A savings safety net
According to the Royal London study around one in five people who have been diagnosed with a critical illness had no savings to fall back on.
Everyone should try to build some form of safety savings net that they can turn to in the event of an emergency, whether that’s an unfortunate diagnosis or an exploded boiler.
Just putting a couple of pounds away every month can make a difference, just remember to keep it in an account which you can easily access – there’s no point locking that cash away in a long-term bond for example.
Critical illness insurance
A more robust option is to get some form of insurance in place which will step in should you fall ill, such as critical illness cover. These cover illnesses like cancer, heart attacks and strokes
It is usually sold alongside life insurance, and pays out a tax-free lump sum if you develop certain conditions, providing some peace of mind should you need to take an extended period off work.
However, it is not as simple as it may appear – the exact list of illnesses covered will vary between insurers, as will what severity the illness needs to reach before a payout is possible.
As a result, it’s important that you really research each policy before signing up for one, or make use of a financial adviser. You can find one in your area using the Unbiased website .
What does critical illness cost? And will they pay out?
According to MoneySuperMarket , the average cost for critical illness alongside life insurance is around £58 a month (many insurers don’t sell critical illness as a standalone product), though the cost of your premium will vary depending on things like your age, your health and whether you have ever been a smoker.
Thankfully, payouts are actually very high on critical illness policies; according to the Association of British Insurers, 92.2% of claims were paid in 2016, with the average payout standing at almost £68,000.
The biggest reason for claims being turned down is non-disclosure – basically when an insurer only discovers some aspect of your medical history when you need to make a claim, rather than when you apply for cover.
The lesson here is that it’s vital to be completely upfront about your medical record from the outset!
What about income protection?
An alternative option that’s worth considering is income protection. This is slightly different in that it pays out a monthly income – as much as 70% of your regular income – rather than a lump sum.
You can go for a short-term policy, which will cover you if you are unable to work for a set period of time, generally around six to 12 months. Or there’s the long-term option, which pays out until you are ready to go back to work, until you reach a certain age, or even until you die.
The size of your premiums will vary depending on how much of your income you choose to protect and how long you want to protect it for.