In 1983 when the first insurance policies were sold they only provided cover against the four most dreaded events of cancer, heart attacks, strokes and by passes (Policies have been known as “dread disease” and “critical illness”, with many companies still using this last description.). Since then we have seen an explosion of cover for up to 154 different conditions ranging from Alzheimers to tunnel vision.

As the name suggests cover can be bought to provide protection against a variety of diseases and conditions which although not always life threatening, can seriously impair your quality of life, and even worse your ability to carry on working. What happens when an event occurs or you are diagnosed with a serious illness will vary from policy to policy, but generally the cover is provided to help pay for all the things that you have to carry on paying for when you are ill, whether that’s as simple as day to day outgoings, adapting your home to cater for a disability, through to paying the mortgage.

Actually, being able to carry on paying a mortgage is one of the things that has been thought about most by companies that provide insurance, leading to them developing policies which are bought on their own, or which “bolt onto” any life insurance you take out to repay the mortgage in the event of your death. Some policies are structured to repay some of the mortgage on diagnosis of a condition, whilst others pay the full amount immediately with no further payment later.

Whilst some of us will be fortunate enough to have this insurance provided through their employer, for many looking into serious illness insurance cover should be a sensible part of their personal finance arrangements. Serious illness cover is unusual because it can provide useful cover whether or not you have any dependants.

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Small medical expenses don’t seem too bad by themselves, but regular dental check-ups and buying a pair of glasses can quickly add up. Health cash plans are designed to give you money towards optical, dental and other treatments without forcing you to fork out for expensive insurance premiums, potentially saving money as a result.

It is really a way of budgeting each month for medical and healthcare expenses. You pay money in every month and then if you have a treatment for something or have to go to hospital, you get a cash “rebate”.It may sound a bit like the better known Private Medical Insurance (PMI) except it is generally cheaper and you are pretty much guaranteed to get at least some, if not all of your money back by the end of the year.

However, it is important to appreciate that health cash plans do not care for your health in the same way as PMI:

• Instead of covering the costs of private healthcare in case you need big operations or specialist consultations, health cash plans aim to alleviate all your non-NHS bills and help you maintain your health to avoid the need for big operations.
• They cover treatments which would not be covered by PMI.
• To become a member of a plan, you do not have to undergo any medical examinations and your premiums are not related to the condition of your health.

However, just like PMI, a health cash plan does have limits on how much it will contribute to your costs.  First of all, each benefit states the percentage of the costs that it will cover. For example for opticians and dental costs it is often 100%. But for other it might only cover 75% of costs. Secondly, each benefit also has a maximum annual payout depending on how much you pay a month. For example, if the limit for optical care was £75 a year, then the company will pay your first £75 of optical care claims that year. After that you will have to foot the bill yourself.

The majority of health cash plan providers are charitable or non-profit organizations and as a result, payments are often cheaper and claiming is easier. Joining these schemes is also very easy, you can either apply online or download a printable registration form which you then fill out and send off to the company. You will be asked for some details and medical history as some of the providers will not cover any pre-existing conditions you have.

Finally, as with other financial plans you just need to be careful to check the terms and conditions of these plans to see if they are going to be suitable for your needs. Read these carefully before you proceed.

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In simple terms, insurance allows someone who suffers a loss or accident to be compensated for the effects of their misfortune. It lets you protect yourself against everyday risks to your health, home and financial situation.
There are many different types of insurance:

You are unlikely to need every single one of these, so read around, choose carefully and remember to read the small print.

* Travel: Holidays can be dangerous occasions – especially abroad. If someone falls ill it is much more difficult than it would be at home to cope with the situation. Medical treatment is expensive. More here.
* Household contents and building insurance: Contents insurance covers the contents of a home such as furniture, carpets, clothes, television, refrigerators, jewellery and so on. In other words, what you would take with you if you moved. Buildings insurance protects against damage to the actual structure of the home and to its fixtures and fittings. Contents and buildings policies can be bought separately or together in one package. More here.
* Car insurance: Most people know something about motor insurance. This is because any vehicle driven on public roads must have a certain level of insurance. The Road Traffic Act ensures that drivers must meet liabilities they incur should they injure other people or cause damage in an accident. More here.
* Life insurance: A means of providing for your dependents should you die early, but also a way to save cash through endowment policies or similar.
* Private medical insurance: This covers the costs of private medical treatment for curable short-term illness or injury. It means that should you become ill you could be treated immediately privately rather than being put on an NHS waiting list. More here.
* Critical illness insurance: This allows you to insure your income/ health were you to become too ill to work later on in life, and protects any dependents/ loved ones from the financial consequences of such unexpected events. More here.
* Accident, sickness and unemployment cover: According to Moneyextra: “In 1999, 30,000 properties were re-possessed by mortgage lenders… Many lost their homes because they could no longer afford to pay their mortgage payments through an accident, sickness or unemployment.” If you are planning on buying a house it may be sensible to think about getting some mortgage payment protection insurance.
* Pet insurance: This basically helps you foot the vet’s bills if your pet gets poorly. By paying regularly into an insurance policy it means you have paid for the bill gradually rather than having to find the money for a steep bill when you can least afford it. More here.

Excess charges

Insurance policies often have hidden costs and hard-to-understand small print. Look out for excess charges, as they won’t always pay the first £50 or more of an insurance claim.
What do all the words mean?

Don’t know your underwriter from your write-off? Visit BBC Watchdog for a quick glossary.
How do I make an insurance claim?

* Keep any evidence: Depending on the situation either get the names and addresses of any witnesses, keep any relevant receipts, or take photographs.
* Contact the broker/ insurer: Give them a ring then follow up with a letter, keeping a copy for yourself. They should send you a claim form, which you should fill out and send back ASAP. Send 2-3 professional estimates for the repairs with the form.
* Help with your claim.

Who can I complain to?

If you aren’t happy with the way your insurance company is acting you can contact the financial ombudsman service who offer a free, independent service for resolving disputes with insurance firms.

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