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Is critical illness insurance worth it?

Is critical illness cover worth it? It can be a cost-effective way to protect you financially against illness and disability. But there are pros and cons. Here’s what you need to know...

Is critical illness cover worth it? It can be a cost-effective way to protect you financially against illness and disability. But there are pros and cons. Here’s what you need to know...

Written by
Tim Knighton
Life, health and income protection insurance expert
Last Updated
29 FEBRUARY 2024
6 min read
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What is critical illness insurance?

Critical illness insurance is designed to pay out a tax-free sum if you’re diagnosed with a serious illness or suffer an injury listed in the policy.

The lump sum is yours to spend how you choose. If you’re unable to work, it can help with living costs, mortgage repayments or medical treatment.

Should I get critical illness insurance?

Before deciding whether critical illness cover is right for you, consider:

  • How much does it cost?
  • What are you covered for?
  • Do you really need it?

Do I need critical illness cover?

Critical illness cover can relieve a financial burden during a stressful and traumatic time.

Have you ever considered how much it would cost to pay someone to do the chores, childcare and cooking if you were too ill to do them?

While the government offers support, many of us overestimate how much state aid we’d receive if we were signed off work – Statutory Sick Pay is just £109.40 a week.

Critical illness cover could be right for you if you don’t have: 

  • Enough savings to cover your loss of income if you become critically ill
  • A partner whose income can cover your living costs
  • An employee benefits package that covers long-term sickness (for critical illnesses).

Before taking out critical illness insurance, check the cover you already have. If you have income protection or mortgage payment protection, you may already be protected.

Is this the best type of illness insurance for me?

The best type of illness insurance for you will depend on your personal circumstances and how much you want to pay.

If you’re self-employed, critical illness cover could give you valuable peace of mind. You may also want to look into income protection insurance or payment protection insurance. This could cover your mortgage and credit card payments if you lose your income.

Are there any exclusions to critical illness cover?

Yes, there are likely to be exclusions. If you work in a dangerous job, then head injuries or loss of limb may not be covered. If you have a family history of conditions such as multiple sclerosis, you may find they’re not covered either.

What you need to know before you take out critical illness insurance

Before buying a critical illness policy, it’s important to make sure you get a good-quality policy at the right price. The best way to do this is to compare policies, so you can decide which one is right for your needs.

What you must tell your insurance provider before you take out critical illness insurance

Before you’re accepted for critical illness insurance, your insurance provider will want to know information including:

  • Your age, weight and height
  • Your medical history
  • How much you drink
  • Whether you smoke.

Always tell the truth, even if it means your premiums cost more. If you’re dishonest and your insurance provider finds out, they could reduce or refuse the pay-out if you claim.

Do you have enough money to pay for illness insurance?

Only you can answer this question. If you don’t have savings, you may find that critical illness insurance is an affordable way to provide yourself with a financial buffer.

How to buy critical illness insurance

Start by thinking about how much cover you need and how much you want to pay. Then compare policies to see which one best suits your circumstances.

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How much does critical illness cover cost?

There’s no average cost of critical illness cover – it depends on the individual and the policy they choose.

The cost of your insurance also depends on whether you opt for additional or combined critical illness cover.

Additional cover means you take out life insurance and critical illness cover separately. With combined cover, you take out a policy that includes both life insurance and critical illness insurance.

How are critical illness cover premiums calculated?

When calculating how much you’ll pay, insurance providers consider:

  • Your age – the older you are, the more you’ll typically pay.
  • Your lifestyle and habits – insurance providers will want to know how healthy you are and the likelihood of you getting a serious health condition. Providers may also take any harmful habits, such as smoking, and any dangerous hobbies into account when calculating your premiums.
  • Your medical history – if you have certain medical conditions, insurance providers may not cover you for that condition or they’ll charge a higher premium.
  • Your family medical history – if your family has a history of serious illness, insurance providers may factor this in.
  • Your job – does your job make you more likely to suffer an injury or illness?
  • The length of your policy – generally, the longer the cover lasts, the more it will cost.
  • The level of cover – how much you want to receive if you claim.
  • The waiting period – this can mean the period you have to wait before making a claim, or the time between making a claim and receiving a pay-out. Shorter waiting periods usually mean higher premiums.

Some insurance providers will require you to have a medical examination before they’ll offer you a quote.

Can I cancel my critical illness cover?

You can typically cancel your critical illness insurance within 30 days of applying and get a refund, unless you’ve made a claim. You can cancel at any time after that, but you may not get a refund.

As soon as you stop paying, your cover will end.

Critical illness cover explained: what will I be covered for?

Critical illness policies tend to cover serious conditions such as:

  • Cancer
  • Heart attack or conditions requiring a coronary artery bypass
  • Stroke
  • Kidney failure
  • Major organ transplant
  • Multiple sclerosis.

Each insurance provider tends to have its own definitions of the illnesses and conditions it covers. So read the small print to make sure you understand the cover you’re getting.

Critical illness insurance pros and cons

Critical illness cover has advantages and disadvantages.

Pros

  • You’ll be able to cover essential outgoings
  • Pay-outs are tax free
  • Children’s critical illness cover may be included automatically
  • Enjoy valuable peace of mind.

Cons

  • It doesn’t pay out if you die
  • It doesn’t cover every illness or condition
  • Premiums can be expensive.

How much critical illness cover do I need?

To work out how much critical illness cover you need, make a list of all the expenses your pay-out would need to cover. That could include:

  • Rent or mortgage payments
  • Household bills
  • Care for dependents
  • Any loans or credit card debt
  • Medical treatment.

Generally, the larger the pay-out you need, the higher your premium will be.

It’s also worth checking what government help would be available if you’re unable to work.

What else should I consider when comparing critical illness cover?

When comparing critical illness cover, it’s important to read the policy to see which conditions are covered and how claims are assessed.

When shopping around, look out for the term ‘fixed premiums’. This means the cost of your premium is fixed and the insurance provider can’t raise the price.

It may be worth paying a little extra to add a waiver of premium to your policy. That means your insurance provider could cover your monthly premiums if you’re unable to work.

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Frequently asked questions

What’s the difference between critical illness cover and life insurance?

Life insurance pays out when you die, whereas critical illness cover should pay out if you’re diagnosed with a serious condition listed in your policy.

What’s the difference between critical illness cover and income protection cover?

Unlike critical illness cover, income protection insurance provides regular pay-outs to cover part of your income if you can’t work. Depending on your age and the policy, you can continue receiving payments until your policy ends, you return to work or you retire.

How long does a critical illness insurance policy last?

Like life insurance, critical illness insurance tends to only pay out once. After that, the policy ends. It’s a long-term insurance policy, which means you don’t need to renew it each year.

However, once your children are grown up, you retire or you’ve paid off your mortgage, you may want to cancel the policy.

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Tim Knighton - Life, health and income protection insurance expert

"The fact that over 50s life insurance offers guaranteed acceptance is a huge benefit. You don’t need to worry about passing any health checks and you can make sure your beneficiaries are looked after. Just make sure that you plan for inflation, otherwise you might leave your loved ones short when they need" 

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