Critical Illness Insurance for IT Contractors in the UK

For, contractors, taking out critical illness insurance is crucial.

For those contractors without dependents it could be argued that there is little need for traditional life insurance.

As long as sufficient cover is in place to repay any outstanding mortgage or other debt in the event of your death, so that no burden is left on any remaining family members, then contractors should maybe think more about ‘looking after number one’.

Of far more relevance to many is so called ‘critical illness insurance cover’.

This pays out on earlier diagnosis of (i.e. not on death) a range of serious conditions.

Contractor Insurance Advice
Contractor Insurance Advice

These illnesses would often have been killers even 15 years ago. However, they are now treatable thanks to modern medical advances.

Pressures of IT Contracting

However these same illnesses (that can incidentally often be traced back to the pressures of contracting-stroke, heart attack, cancer etc) can often leave you in a reduced state of health.

For a regular monthly premium a contractor can arrange for a lump sum to be provided on such a diagnosis. These funds will to help pay for a period of convalescence, pay for changes to home or car to accommodate a reduced state of mobility and go towards maintaining your independence.

Without, perhaps, the burden of your mortgage and with money in the bank you can then decide whether you need to get back into the rat race that put you in hospital in the first place.

Income Protection for IT Contractors

This cover goes hand in hand with income protection / Permanent Health Insurance (PHI) which pays a monthly income in event of illness. However, this would stop once you were assessed as having made a satisfactory return to health.

Unfortunately this early suspension of the payments on a PHI policy means you’re forced back to rat race that possibly caused the illness in the first place.

The lump sum pay out from a critical illness policy would be yours to keep. This is regardless of a return to some measure of good health. It could maybe allow for some changes to your work pattern etc.

Again these changes could be significant in that they may help you to avoid a re-occurrence of the illness. A re-occurrence could prove fatal a second time around.

Life Cover for IT Contractors

With life cover, cost, the approach of the underwriter and the financial strength of the company (i.e. will the provider still be around to meet its obligation to you in 10 years time) are all issues to consider.

However when advising contractors on critical illness we try to ensure that quotes are competitive. We must also take into account very many more issues.

Medical definitions of what is covered are very important. These must be comprehensive enough to be of practical use to you in the event of a claim.

The provider must also have a good track record of actually meeting claims. With life cover alone you’re either dead or your alive and so there’s no question of that insurer can avoid paying benefits out!

Premiums must also remain affordable throughout so that protection can also be maintained, as you get older and even more likely to fall ill.

Fixed Term Contractor Insurance

You can cover yourself for a fixed term (i.e. until children grow up /a debt is repaid) or for your entire life (Whole of life- WOL)

You also have the option of a decreasing amount of cover (decreasing Term Assurance, DTA) that will reduce in line with a reduced liability. That is, for example, a repayment mortgage or a level amount (level term assurance, LTA).

Ordinarily life cover will pay a lump sum. However, if you have reservations about the ability of a dependent to cope with a one off payment you may prefer to insure for a set term but have benefit payable annually if you die within the term.

In this way it may be easier to for the beneficiary to budget. This scheme is known as a family income benefit (FIB).

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