What is Serious Illness Cover, and could it help stay-at-home mums in the UK?

For many families in the UK, a parent’s decision to stay at home to care for children or manage the household is a personal one. While this role often brings many rewards, it can also come with unique financial considerations. If you are a stay-at-home mum, you might focus on the daily routines and immediate needs of your family, but you could also consider thinking about how your family might manage financially if a serious illness were to strike. This is where Serious Illness Cover could potentially offer financial protection.

At Polly, we believe it’s all about helping you understand how different types of financial protection could support your family. This guide explores what Serious Illness Cover typically entails and how it might be a consideration for stay-at-home mothers in the UK.

What is Serious Illness Cover?

Serious Illness Cover, sometimes known as Critical Illness Cover, is a type of insurance designed to pay out a tax-free lump sum if you are diagnosed with a specified serious illness during the policy term and survive for a set period (usually 14 or 28 days, depending on the policy terms). The illnesses covered are usually defined in the policy document and might include conditions like certain types of cancer, heart attack, or stroke.*

This type of policy is typically different from income protection insurance, which can provide a regular income if you are unable to work due to illness or injury. Serious Illness Cover provides a single lump sum payment, which the policyholder can use as they choose.

*The specific conditions covered can vary between different providers and policies. For example, Polly’s Serious Illness Cover policy includes defined conditions such as certain types of cancer, heart attack, and stroke, among others, subject to specific definitions and exclusions as detailed in the policy document. Always review your policy documents for a full list of covered illnesses and exclusions.

Why might Serious Illness Cover be a consideration for stay-at-home mums?

If you are a stay-at-home mum, you might not have a traditional ‘income’ in the same way as a salaried employee. However, your role typically provides significant economic value to your household. You are often responsible for childcare, cooking, cleaning, and other essential tasks that would likely incur significant costs if they needed to be outsourced. Research by Legal & General suggested in their 2023 Bank of Family report, drawing on 2022 data, that the economic value of a stay-at-home parent could be around £49,000 per year*.

If you were to become seriously ill, your family could face several financial challenges:

• Loss of ‘invisible income’: The services you provide, such as childcare, cooking, cleaning, and managing household logistics, often have a real financial value. If you were unable to perform these tasks due to illness, your family might need to pay for external help, such as professional childcare, cleaners, or ready meals.
• Increased medical or care costs: While the NHS provides excellent care, there can be associated costs with a serious illness, such as travel to appointments, specialist equipment, adaptations to your home, or private rehabilitation if you choose that route.
• Impact on a partner’s income: If your partner works, they might need to take time off work to care for you or your children, which could lead to a reduction in their income.
• Everyday living expenses: Mortgage or rent payments, utility bills, groceries, and other regular expenses do not usually stop if you become seriously ill. A lump sum could help cover these costs during a difficult time.

Serious Illness Cover could potentially offer a financial safety net for your family during such a challenging period. The lump sum payment could help alleviate financial pressure, allowing your family to focus on your recovery and adjustment without immediate worries about day-to-day expenses or the cost of replacing your contributions to the household.

*Legal & General. (2023). Bank of Family Report. Retrieved from: https://www.legalandgeneral.com/asset/499553/globalassets/personal/retirement/_resources/documents/research/bof-mainreport-2023.pdf

What could a Serious Illness Cover payout be used for?

The flexibility of a lump sum payment from Serious Illness Cover means it could be used in various ways, tailored to your family’s specific needs at a difficult time. Here are some potential uses:

• Replacing ‘invisible income’ costs: You might use the funds to pay for professional childcare, a nanny, or domestic help to manage household tasks if you are unable to.
• Supporting your partner: If your partner needs to take unpaid leave from work to care for you or the children, the payout could help bridge that income gap.
• Medical and rehabilitation expenses: While the NHS provides core services, you might use the funds for private medical treatment, physical therapy, counselling, or specialist equipment that could aid your recovery.
• Modifying your home: If your illness requires adaptations to your living space, the lump sum could help cover these costs.
• Covering living expenses: The funds could help maintain your family’s lifestyle by contributing to mortgage or rent payments, utility bills, groceries, and other essential household outgoings.
• Reducing debt: You might choose to pay off debts like credit cards or loans, reducing financial stress during your recovery.
• Creating a financial buffer: Simply having a lump sum available can provide a sense of security and flexibility during an unpredictable time.

How does Serious Illness Cover work?

Typically, Serious Illness Cover policies involve a few key elements:

1. Choosing your cover amount: You decide on the lump sum amount you would like your policy to pay out. This decision often depends on your family’s financial needs, considering things like your household expenses, potential childcare costs, and any outstanding debts.
2. Setting the policy term: You decide how long you want the cover to last. This could align with specific life stages, such as until your children become financially independent or until your mortgage is paid off.
3. Diagnosis and claim: If you are diagnosed with one of the specified serious illnesses listed in your policy document during the policy term and meet the survival period criteria, the policyholder can make a claim.
4. Payout: If the claim is successful, the tax-free lump sum is paid out. The policy typically ends after this payout.

Things you might want to consider

When thinking about Serious Illness Cover, it can be sensible to consider the following:

• The definition of ‘serious illness’: Each policy will have its own list of specified illnesses and detailed definitions for each. It is important to carefully review these to understand what is and is not covered. For example, Polly’s Serious Illness Cover policy outlines specific conditions and criteria for a valid claim.
• Exclusions: Policies will usually have exclusions, which are circumstances under which a claim would not be paid. These might relate to pre-existing medical conditions or specific activities.
• Survival period: Most policies include a survival period (e.g., 14 or 28 days) after diagnosis for the payout to be made.
• Cost: The premium you pay for Serious Illness Cover depends on several factors, including your age, health, lifestyle, the amount of cover you choose, and the policy term.

Serious Illness Cover vs. Life Insurance

It can be helpful to understand the differences between Serious Illness Cover and life insurance, as they serve different purposes:

• Serious Illness Cover: Pays out a lump sum if you are diagnosed with a specified serious illness and meet the policy conditions. It is designed to support you financially while you are alive and dealing with a serious health condition.
• Life Insurance: Pays out a lump sum if you pass away during the policy term. It is primarily designed to provide financial support for your loved ones after your death.

Some people choose to have both types of cover to provide a more comprehensive financial safety net for their families. Polly offers both Serious Illness Cover and our Polly Family Protection policy, which is a form of term life insurance.

Our approach at Polly

At Polly, we aim to provide accessible financial protection. Our focus is on helping you find a policy that could help support your family’s financial future. We offer both Polly Serious Illness Cover and Polly Family Protection, a form of term life insurance.

We can help you understand how our policies work and whether they might be suitable for your family’s needs. The aim is to help you feel prepared for what life might bring.

Could Serious Illness Cover be right for your family?

Considering Serious Illness Cover can be a proactive step for stay-at-home mums. It could offer financial support, knowing that if a serious illness were to occur, your family might have a financial buffer to help manage the associated costs and changes.

You might want to consider speaking with a financial adviser to discuss your individual circumstances and explore whether Serious Illness Cover or other financial protection products could be suitable for your family’s needs.

TL;DR

Serious Illness Cover is a type of insurance designed to provide a tax-free lump sum if you are diagnosed with a specified serious illness. For stay-at-home mums, this cover could help mitigate the financial impact of a serious illness by covering household expenses, childcare costs, or medical-related outgoings, potentially helping to protect the family’s financial stability. Polly offers Serious Illness Cover, as well as Polly Family Protection (a type of level term life insurance), and aims to help you understand the different financial protection options available to you.