This product is often linked with a life assurance policy (Decreasing or Level term) but it is also available on a standalone basis. The policy pays out the agreed assured sum, for defined medical conditions at the time of diagnosis (subject to the terms and conditions of the policy) rather than on the death of the insured. Indeed, you can recover fully from your illness and still retain the amount ‘paid out’ by the policy.
However, where it is a combined Life & Serious Illness Policy and a claim has been made and paid by the assurance company in respect of a serious illness, on the death of the insured an additional benefit would be payable to the insured party under the terms of the policy.
Main use / Advantage
It provides the additional assurance that should the insured person become ill with a defined medical condition that the benefit of the policy is paid during the lifetime of the insured rather than after their death. The funds can be used as the client wishes providing the policy has not been assigned to a lender, in which case only the amount of the policy, in excess of the outstanding borrowings, will be available to the insured person.
The policy is often associated with level term assurance, and if so it can be mortgage related. However, if you purchase a standalone Serious Illness Cover policy, it is not usually associated with mortgage borrowings and you can use the benefit as you see fit. This benefit is paid tax free.