An introduction to standalone critical illness

While many clients may expect critical illness to befall older generations, the reality is that relatively young people receive surprising and frightening diagnoses every day.

During the first half of 2021, the average age of someone claiming on a Zurich policy having needed open heart surgery was just 35. Those diagnosed with degenerative conditions were also a lot younger than you might expect – 44 for multiple sclerosis, 45 for motor neurone disease, 56 for Parkinson’s and 61 for Alzheimer’s.*

The biggest area of claims remains cancer. Our first-half claims figures show that the average age of claimants for various cancers was typically in the late 30s, 40s and 50. For example, testicular cancer was 38, ovarian and cervical cancer were both 44, and bowel cancer was 52.*

These figures may startle many clients, but the good news is that many cancers are now survivable. While having critical illness cover will not improve your client’s prognosis, it can alleviate one major source of worry while they undergo treatment and recuperation – the stress that having a critical illness puts on their finances.

Standalone cover

Zurich Critical Illness covers policyholders for 40 serious conditions, including cancer, heart attack and stroke. It also pays 25% of the sum assured up to £25,000 to those who are diagnosed with one of two additional payment conditions – less advanced cancer of the breast or prostate – to help at a financially and emotionally difficult time when the future may feel very uncertain. If the disease progresses, the policy still pays out in full.

Zurich Critical illness Select is more comprehensive and gives clients more choice. It covers 51 serious conditions and 48 additional payment conditions. If a client is diagnosed with one of ten life-changing conditions before the age of 50, the policy pays out up to £100,000 on top of the sum assured to help them adapt to a life-changing diagnosis.

Our existing critical illness policies are accelerated – in other words, they pay out on death or the diagnosis of a covered critical illness, whichever earlier. Now, for advised customers we are introducing Standalone Critical Illness cover, which pays out on the diagnosis of a critical illness only.

There is no payment on death. Instead, clients must survive for 10 days after the diagnosis of any critical illness before a claim becomes valid (as is standard across the market).

Who might benefit from a Standalone Critical Illness cover?

There are various scenarios where such a policy may be better suited to a customer’s circumstances. Let’s look at three case studies:

Sunita, 29

Sunita is 29 years old, married and without children. She works for a bank, which offers death in service benefit. If she dies, this pays out a tax-free lump sum to her husband which provides her with sufficient life cover. She would benefit, however, from critical illness cover to help absorb the financial impact of being diagnosed with a serious illness.

Grant, 40

Grant is in a civil partnership. He and his husband recently adopted a child. The five-year fixed deal they had on their mortgage ended so they have decided to remortgage to a new, lower deal for another five years. Grant wants to ensure his family is protected should anything happen to him. He already has life cover so his financial adviser recommends he takes out a standalone critical illness cover as they can now afford this after remortgaging. As standalone critical illness covers adopted children, Grant decides to add Children’s benefit to his cover.

Alex, 43

Alex and his wife Jennie have a small child and have just taken out a large mortgage on a new house. Alex has his own small graphic design business and his adviser has outlined the tax efficiencies of a relevant life policy, whereby the company takes out the policy on his behalf and pays the premiums. This is available as life cover only, making a standalone critical illness policy an ideal complement. Having two standalone policies also ensures that the life cover continues following any critical illness payment – something that Alex deems important given his dependent child and large mortgage.

Joanne, 36

Joanne is 36 and recently divorced. She has two children. She wants to protect her family financially should anything happen to her. However, affordability is an issue. She took financial advice when going through her divorce and the adviser has gained her trust. The adviser suggests purchasing a smaller amount of critical illness cover than life insurance. This keeps the premiums within a budget that Joanne is comfortable with, while providing a substantial lump sum to her children in the event of her death and a less substantial but nevertheless significant sum to enable her to take time off work should she be diagnosed with a serious illness. Two standalone policies – one providing life insurance and the other critical illness cover – are optimal for her needs.

*Zurich claims results H1 2021