Ask yourself this question ‘Could you afford to pay your monthly financial commitments if illness prevented you from working?' The vast majority of us would say ‘No'. So surely we need to consider insuring ourselves against the worst happening. A typical critical illness policy would pay out a tax free lump sum if the policyholder is diagnosed with a potentially terminal illness. The lump sum can be spent in a number of ways. For example, you could pay off your mortgage, make alterations to your home to accommodate a wheelchair, or simply settle your bills.



The next few months will see a sharp rise in premiums, so if you don't have cover at present now is the time to sign up. The cost of life cover has become more affordable over the past fifteen years. There are several reasons why this has happened. Firstly the Aids epidemic, which was expected in the 1980s never materialised and secondly the survival rate of those suffering from heart attacks and cancer has greatly improved. These factors have enabled insurers to reduce premiums.

The reverse is true for critical illness policies where the number of people claiming has risen substantially recently and consequently premiums have risen. Protection is regularly reviewed by insurers, when the number of claims for certain conditions are assessed. Following such a review Legal and General will be amending premiums shortly, with the cost of life cover falling slightly and the premiums for critical illness cover rising. The insurer is unable to say by how much, as the individual's circumstances and the sum covered vary from customer to customer, but the increase should not be large.

On the other hand LifeSearch is predicting that there could be a rise of between 30 and 50 per cent in critical illness premiums over the coming months. It also fears that guaranteed rates may either become unaffordable for many, or even cease to exist due to the unstable marketplace.

Swiss Re has announced that it will no longer underwrite critical illness policies from the end of the year as the cover is costing them too much.

The cost of cover has been increased by two major insurance companies. A 20 to 25 % rise has recently been announced by Swiss Life and L & G. However this is small beer compared to the staggering increases written into the policies now available from BUPA and Friend's Provident, which range between 50 to 60%.

It is feared that this trend will be followed by other re-insurers. Guaranteed premiums where the monthly cost is held for a specific term, typically ten years, may no longer be offered by insurers. In future, premiums will be reviewed annually, just like motor and home insurance. The outlay for the customer will be far greater in the long term. The message is clear. Critical illness cover is becoming more expensive so sign up now to benefit from guaranteed rates and the relatively low premiums being offered at present. Let us hope that you will never have to claim, but statistics indicate that more and more of us will.