Is critical illness cover worth it?

If you become seriously ill, critical illness cover can give you the peace of mind that you’re financially protected. But before you take out a policy, it’s important to weigh up the pros and cons to decide if critical illness cover is right for you.

Kara Gammell

Finances expert

minute read

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Posted 09 DECEMBER 2021 Last Updated 19 APRIL 2022

What is critical illness insurance?

Critical illness insurance is a policy that will pay out a tax-free sum if you are diagnosed with a serious illness or suffer a serious injury that is listed in the policy.

The lump sum is yours to spend however you choose. It could, for example, help relieve the financial burden of living costs, mortgage repayments or medical treatments if you’re unable to work.

However, before you decide whether critical illness cover is right for you, consider these questions:

How much does it cost?
What will you be covered for?
Do you really need it?

How much does critical illness cover cost?

There’s no average cost of critical illness cover, as it very much depends on each individual policyholder and the policy they choose. Although you can buy stand-alone critical illness cover, it’s often combined with or added on to a life insurance policy.

When calculating a price for your critical illness cover, insurance providers will consider things including, but not limited to:

Your age: typically, the older you are, the more expensive your premium will be.
Your lifestyle and habits: insurance providers will look at your habits to see how healthy you are and to calculate the likeliness of you getting a serious health condition. For example, losing weight and quitting smoking are two ways you can potentially reduce your premiums. Providers may also take any dangerous hobbies into account when they calculate your premiums.
Your medical history: if you have existing or previous medical conditions that could make you more likely to suffer future illness or injury, insurance providers may not cover you for that condition or will likely charge higher premiums.
Your family medical history: if you have any history of serious illness in your family, insurance providers will take this into account when calculating your premiums.
Your job: are there any risks involved in your career that could make you more likely to suffer injury or illness?
The length of your policy: generally, the longer the cover, the more it will cost.
The level of cover: how much you want to receive as a lump sum if you need to make a claim.
The waiting period: this can refer to the amount of time you have to wait between taking out your policy and making a claim, and the amount of time you have to wait after making a claim before you receive a pay-out. To get a shorter waiting period, you’ll normally have to pay a higher premium.

When it comes to insurance, honesty really is the best policy. If your insurance provider finds out you weren’t truthful, by falsely claiming to be an ex-smoker for example, your policy could be invalidated. Some insurance providers will also require you to go for a medical examination before they’ll offer you a quote.

It’s also important to make sure you can afford to pay the premiums for any critical illness cover before you buy. That’s because if you can’t pay your premiums, your cover will stop and you won’t be able to recoup any of the money you’ve paid in.

What will I be covered for?

If you’re looking to take out critical illness cover, you should read the terms and conditions of the policy very carefully before you make a decision.

The type of conditions and cover listed by insurance providers can vary greatly. Some policies may list over 50 conditions and injuries that they will cover, but it’s worth noting that your ability to claim will depend on the severity of the illness and if any injury is deemed permanent.

For example, your policy will likely cover cancer, but it may not cover certain types of cancer that are considered treatable or less of a threat. Or you may not be able to claim until you reach a certain stage, as detailed in your policy agreement.

Lots of policies tend to cover these core illnesses/conditions:

cancer
heart attack or conditions requiring a coronary artery bypass
stroke
kidney failure
major organ transplant
multiple sclerosis.

Most critical illness insurance policies will also include permanent disability caused by illness or injury. They may also cover conditions like Parkinson’s disease and Alzheimer’s.

However, each insurance provider tends to have its own definitions of the illnesses and conditions it covers. Always check the policy information to find out exactly what conditions are covered and what are excluded – and read the small print to make sure you know what you’re getting.

Do I really need critical illness insurance?

The main benefit of critical illness cover is that it can relieve the burden of financial costs during a stressful and traumatic time.

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

If you’re in any doubt of the amount of unpaid work that you’re contributing to your household, here at Compare the Market we’ve created a handy calculator that will reveal just what your efforts are worth. Check it out, the results might surprise you.

And you shouldn’t count on the government for support. Many of us dramatically overestimate the amount of state aid we’d receive if we got signed off work long term, but Statutory Sick Pay is just under £100 a week.

Not exactly enough to cover all your expenses, now is it? Although it definitely highlights the importance of critical illness cover…

To sum up, critical illness could be right for you if:

You don’t have enough savings to cover your loss of income if you become critically ill and can’t work
You don’t have a partner whose income can cover the mortgage and other living costs
You don’t have an employee benefits package that covers long-term sickness (for critical illnesses)

It’s worth checking any other type of protection insurance you may have, like income protection or mortgage payment protection, as you may find you already have adequate cover for serious illness.

How much critical illness cover do I need?

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

Rent or mortgage payments: either to pay off your mortgage or to keep the rent or mortgage payments covered for a certain amount of time.
Household bills: consider the cost of all your monthly outgoings, including utilities and energy bills, and things like car insurance, phone bills and council tax.
Providing for your family: you should think about how much you’ll need to care for any loved ones who depend on you, for necessities like food and clothes.
Debts: you should factor in any loans and credit card debt that you’re currently paying off so you can continue payments if you find yourself unable to work.
Medical treatment: although we are lucky enough to have the NHS to provide our care, it’s worth setting some money aside in case you need to make any adaptations to your home because of serious injury, or if you need to travel for treatment.

To get an accurate picture of how much cover you need – or if you need cover at all – don’t forget to factor in any savings you have that could cover some of these expenses. Generally speaking, the larger the pay-out you need, the more you’ll have to pay in premiums.

You could also look at what government help might be available to you. Depending on your circumstances, if you’re unable to work you could be eligible for an Employment and Support Allowance, Universal Credit to help with housing and childcare costs, or, if you have a long-term illness or disability, the Personal Independence Payment.

What else should I consider when comparing critical illness cover?

It’s especially important when comparing critical illness cover to read the policy details carefully to see what conditions are covered, how serious the condition must be before you can claim and how claims are assessed.

When you’re shopping around, keep an eye out for the term fixed premiums. This means that the amount you agree to pay in premiums when you take out the policy is fixed and your insurance provider won’t be able to raise the price in the future. You may also consider paying a little extra to add a ‘waiver of premium’ to your policy. This means that if you’re unable to work because of illness or injury, your insurance provider will cover your monthly premiums. Although, depending on the terms of your policy, you may have to be off work for a while before it kicks in.

Some policies may provide critical illness cover for your children too. That means you would receive a pay-out to help take care of them, in the event that they’re diagnosed with a critical illness.

Bear in mind that we’re all living longer, so make sure that you think past traditional retirement age or your mortgage term when taking out a protection policy to ensure that you don’t come up short.

It’s also worth considering the changing state pension age as it increases for both men and women to 67 between 2026 and 2028.

Compare protection insurance

If you’re looking for critical illness insurance, another type of illness protection insurance or different life insurance products, check what’s available and compare quotes with us. Use our simple comparison tool here.

Frequently asked questions

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

With life insurance cover, the named beneficiaries on your policy – usually your partner or children – will receive a lump sum if you pass away, to spend as they choose.

Critical illness cover is sometimes included as part of a life-insurance policy, or it can normally be added on for an additional cost.

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

With income protection insurance, you’ll receive regular payments to cover a proportion of your income if you’re unable to work due to illness or injury. Depending on your policy, you can continue receiving these payments until your policy ends, you are able to return to work, or you retire.

How long does a critical illness insurance policy last?

Generally speaking, you decide how long you want your policy to last, although insurance providers may impose a maximum policy term limit, or a maximum age limit for customers. For example, you may decide to buy a policy that lasts until your children are grown up, you retire, or when you have paid off your mortgage.

Can I cancel my critical illness cover?

Yes, you can cancel at any time, but as soon as you stop paying into your policy, your cover will end and you will effectively lose all the money you have already invested. That’s why it’s important to make sure you need and can afford this type of insurance before you buy it.