60-second summary
Want the lowdown on critical illness cover in under a minute? Here you go:
Critical illness insurance is a popular add-on to life insurance, typically providing one lump-sum payout if you can no longer work due to a serious illness.
Unlike life insurance, your critical illness policy could pay out while you’re still alive. You can keep cover running till you claim or don’t need it any more.
Your payout could help you pay for things like rent, mortgage, childcare or debts. It could help if you lost your job and had no other way to pay bills.
It typically covers conditions such as cancer, stroke, heart attack and multiple sclerosis. But policies vary, so always check.
Policies will often exclude conditions where there’s a family history, and/or certain illnesses or injuries you might be at higher risk of because of your job.
The cost of your cover will depend on your personal circumstances, the size of payout required and how long you need cover for.
Before buying, work out how much cover you’d need by listing all the expenses your payout would need to cover. Then shop around and compare a range of quotes.
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 covered by 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.
Critical illness cover is a popular add-on to life insurance. Unlike life insurance, it can pay out while you’re still alive.
What does critical illness insurance typically cover?
Although policies will vary depending on the insurance provider, critical illness insurance tends 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 will have its own definition of ‘critical illnesses’, however. So read the small print to make sure you understand exactly what cover you’d be getting.
Are there any exclusions to critical illness cover?
Yes, any critical illness insurance policy is likely to have exclusions. For example, if you work in a dangerous job, head injuries or loss of limbs may not be covered.
Also, if you have a family history of one of a number of specified conditions, such as multiple sclerosis, you may find it’s not covered.
Critical illness insurance: pros and cons
Like all types of optional insurance, critical illness cover has advantages and disadvantages.
Pros of critical illness cover
You’ll be able to cover essential outgoings
Payouts are tax-free
Children’s critical illness cover may be included automatically
It can offer extra reassurance should something unexpected happen.
Cons of critical illness cover
It doesn’t pay out if you die
It doesn’t cover every illness or condition
Premiums can be expensive and outweigh the benefits.
Do I need critical illness cover?
Critical illness cover can relieve a financial burden during a stressful and traumatic time.
For example, 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. For example, Statutory Sick Pay is just £118.75 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 became critically ill
A partner whose income could cover your living costs
An employee benefits package that covers long-term sickness (for critical illnesses).
But 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 covered.
How much critical illness cover do I need?
To work out how much critical illness insurance you need, make a list of all the expenses your payout would need to cover. This could include:
Rent or mortgage payments
Household bills
Care for dependants
Any loan or credit card debts
Medical treatment.
Generally, the larger the payout you need, the higher your premium will be. It’s also worth checking what government help is available if you’re unable to work.
Is this the best type of illness insurance for me?
The best type of illness insurance for you depends on your personal circumstances and budget.
If you’re self-employed, critical illness cover could give you additional reassurance. 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.
What should I tell my insurance provider before I take out critical illness insurance?
When getting a quote for critical illness insurance, you’ll need to give your insurance provider a few bits of information, including:
Your age, weight and height
Your medical history
How much you drink
Whether you smoke.
When sharing information always tell the truth, even if it means paying more for critical illness cover. If you’re dishonest and your insurance provider finds out, it could invalidate your policy.
How much does critical illness cover cost?
How much your critical illness insurance costs depends on your circumstances and the level of cover you choose.
The price of your policy will also depend on whether you opt for additional or combined critical illness cover:
Additional cover means you take out life insurance and critical illness cover separately.
Combined cover means taking out a policy that includes both life insurance and critical illness cover.
How are critical illness cover premiums calculated?
When calculating how much you’ll pay for your critical illness cover, insurance providers consider a range of factors, including:
Your age – the older you are, the more you’ll typically pay.
Your lifestyle and habits – how healthy you are could be an indicator of how likely you are to get a serious health condition. So when calculating your premiums, providers may take into account any dangerous hobbies you have and any harmful habits, such as smoking.
Your medical history – insurance providers may not cover certain medical conditions, or they’ll charge a higher premium to cover you.
Your family medical history – if your family has a history of serious illness, this may factor into your quote.
Your job – if your job makes you more likely to suffer an injury or illness, your critical illness insurance might not cover you, or you may have to pay more.
The length of your policy – generally, the longer critical illness cover lasts, the more it will cost.
The level of cover – how much you want to receive if you claim will likely impact your critical illness cover premiums.
The waiting period – this is how long you have to wait before making a claim, or the time between making a claim and receiving a payout. Shorter waiting periods usually mean higher premiums.
It’s also worth knowing that some insurance providers will require you to have a medical examination before they’ll offer you a policy.
Can I cancel my critical illness cover?
Yes, 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.
What to consider before taking out critical illness insurance
Before buying a critical illness policy, it’s important to consider the level of cover and policy price vs your needs and budget.
One of the easiest ways to find cover to suit you at the right price is to shop around and compare quotes. At Compare the Market, we do the legwork for you. All we need is a few details about you and we’ll handle the rest.
When comparing critical illness cover, make sure you understand exactly which conditions are covered and how claims are assessed.
Also, 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, too. That means your insurance provider could cover your monthly premiums if you’re unable to work.
FAQs
What’s the difference between critical illness cover and life insurance?
A key difference between critical illness insurance and life insurance is that life insurance pays out when you die. Critical illness cover, on the other hand, 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?
The difference between critical illness cover and income protection insurance is that critical illness cover pays out one lump sum, whereas income protection cover provides regular payouts.
Depending on your age and the income protection policy you have, you can continue receiving payments until your policy ends or you return to work or you retire.
How long does a critical illness insurance policy last?
A critical illness policy is long-term, lasting until either there’s a payout or you no longer need it, eg: if you return to work, retire or your kids leave home.
Because it’s a long-term policy, you don’t need to renew it each year – you just need to keep paying the premiums.
Like life insurance, critical illness insurance tends to only pay out once. After that, the policy ends.
For over 20 years, Tim’s been building and managing relationships with big brands for the benefit of customers. As our expert on all things life, health and income protection, he’s working hard to find the right products that look after you and those you love most.
Our content is written by a Compare the Market expert, backed by data and enhanced by AI. Find out how we ensure accuracy and quality in our Editorial Guidelines.
