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Critical illness cover

Critical illness cover can be a great form of financial protection against potential future illness. But is critical illness cover worth it and do you need it?

Critical illness cover offers peace of mind to those who take out a policy. If you were to unexpectedly get a serious illness, this financial protection will still allow you to pay the bills, mortgage and any other outgoings.

So, what exactly is critical illness cover and should you consider it? Read our guide to answer these questions and more. 

What is critical illness cover?

Critical illness cover is a type of insurance that will pay you a tax-free lump sum if you are diagnosed with a specific illness during the length of the policy. 

Essentially, you are paying for financial peace of mind that you will be able to afford to pay bills during a serious illness. 

It’s important to remember that not all critical illnesses are included in the cover, so you must read into what each policy offers. 

Once you have been diagnosed with an illness that’s covered in your policy, you can make a claim. The lump-sum provided is designed for monthly costs such as mortgages, household bills and general costs. 

Most critical illness policies will only pay out once and once you have claimed, the cover usually ends. 

What does critical illness insurance cover?

Every critical illness cover policy will be slightly different and so different illnesses will be covered depending on your insurer. However, the conditions covered will always be long-term, serious and life-changing illnesses.

Some examples of illnesses that most policies cover include:

  • Stroke

  • Heart attack

  • Cancer (depending on the type and stage)

  • Kidney or liver failure

  • Major organ transplants 

  • Cardiac arrest

  • Brain injury 

If there is a certain illness you want covered, just check with your policy before taking out the cover. Remember, if one insurer doesn’t cover a certain serious illness, another might, so make sure you do your research.

What’s the difference between critical illness and terminal illness cover?

Most life insurance policies include terminal illness cover as standard and it’s entirely separate from critical illness cover. Terminal illness cover means that if you are diagnosed with a terminal illness and your doctor says you are likely to die within 12 months, you will still receive your life insurance payout. 

However, critical illness cover is for conditions that you are likely to recover from. 

Do I need critical illness cover?

Everyone’s circumstances are different and so it really depends on your situation as to whether you feel critical illness cover is needed. 

However, if you believe that a long-term critical illness will put a significant financial strain on yourself or your family, it may be worth considering taking out cover. 

If you have dependants it’s worth considering the following: 

  • Would my family be able to afford the mortgage? 

  • Could my family continue to live comfortably without my income? 

  • Could my family afford to hire additional support?

If the answer to any of the above questions is no, you might want to consider critical illness cover. 

Having said this, if you don’t have any dependants, you might still require cover. For example, if you live on your own, would you be able to afford the rent/mortgage and bills? Even if you are put on benefits, it’s unlikely to be enough to cover everything comfortably. 

Essentially, if you don’t have the savings to take care of yourself or your family if an unexpected critical illness occurs, then it’s likely that cover will be worth the investment.

After all, during a stressful time, the last thing you’ll want to be worrying about is money. 

What types of critical illness cover are there?

When taking out a critical illness policy, there are a few different options depending on your situation. 

Life and critical illness insurance 

You can get a standalone critical illness cover that will pay out in the event of a specified illness. This cover is often bought at the same time you take out life insurance. 

Both the life insurance and critical illness cover will act separately from one another, meaning that you’d get paid in the event of an illness and if you were to pass away during the policy. 

This comprehensive cover will give you the peace of mind that you will be taken care of financially during serious illness, but also your family will be looked after if you were to pass away. 

Combined cover

There’s also the option to take out a combined policy of both life insurance and critical illness. However, this combined cover will only allow you to have one payout. Therefore, if you were to get a critical illness and requested a payout, your insurance would end and your family wouldn’t receive money if you were to pass away. 

This combined cover is cheaper than taking out critical illness cover separately from life insurance, but only pays out in the event of one happening. 

How much does critical illness cover cost?

Your monthly critical illness cover payments will vary depending on your lifestyle, general health and whether you take it out as an addition or combined with life insurance. 

Some things that will affect the monthly cost include: 

  • Your age

  • Lifestyle - whether you smoke or not 

  • Your general health and medical history 

  • Your occupation 

  • The level of cover that you require 

The younger you get critical illness cover, the cheaper it will be. For example, £100,000 of life and critical illness cover for a 30-year-old, healthy, non-smoker, for a period of 20 years would cost on average £25 per month. 

This monthly cost will only increase as you get older, so it’s worth thinking about while you are young. 

Is critical illness cover worth it?

Whilst many people believe that life insurance is sufficient coverage for their family, they overlook the potentially devastating financial effects a critical illness can have. You will be unable to work, which means a potentially significant amount of your family’s income will be gone. 

If you have a large amount of savings to fall back on that will comfortably pay household bills and the mortgage for the foreseeable future, then it might not be worth it. Furthermore, if you have a partner that could comfortably support your family in the event of a critical illness, then the additional monthly cost of critical illness cover might not be worth it. 

However, if the above cases don’t apply to you, it could be worth considering. 

Tips for buying critical illness cover 

If you decide to go ahead and buy critical illness cover, think about the following before you choose a policy:

  • Level of cover - the cheapest option might not be the best for you when picking your critical illness policy. Choose a policy that offers a level of cover you are happy with, including which conditions are covered, and if there are any additional benefits

  • Definitions of illnesses - critical illness cover that includes the Association of British Insurers (ABI) definitions is always a good option. These definitions can make it easier to submit a claim, so it’s good to look out for

  • Type of policy - it’s important to consider whether additional or combined critical illness cover works for you. Additional to life insurance will cost more, but will cover both scenarios. Combined will be cheaper, but will only pay out on one scenario 

Critical illness cover FAQs

Can I get critical illness cover without life insurance? 

Yes. You can buy life insurance without critical illness cover, and you can buy critical illness cover without life insurance. They are just typically bought at the same time, which is why there’s an option to combine them.

If you are younger, you might consider just buying critical illness cover but not life insurance as you are still young. However, it depends on your situation. 

Does critical illness cover diabetes?

Not usually. Diabetes isn’t usually covered in critical illness policies. This means that you cannot claim your critical illness payout based on a diagnosis of diabetes.

Always make sure you check exactly what is and isn’t included in your policy before you buy. 

How do I know my critical illness cover will pay out? 

In order to be confident that your critical illness cover will pay out in the event of a claim, make sure you are honest in your application, your illness is covered, and you can provide proof. 

Also, it’s a good idea to check out the claims history of the insurance provider to make sure that they usually payout. 

The main reasons an insurance provider won’t payout your critical illness claim include:

  • Failing to disclose important information on your application or lying

  • Claiming for a condition that isn’t covered in the policy 

  • Your covered condition not meeting the minimum definition 

  • Not having medical ‘proof’ to back up your claim 

  • Fraudulent claim 

Does critical illness cover protect me during pregnancy? 

Yes and no. If you already have critical illness cover and then become pregnant afterwards, your cover will not be affected.

However, if you are already pregnant and apply to get critical illness cover, some insurance companies will hold your application until after the pregnancy, due to certain health risks in childbirth. 

Some insurance companies will give you cover whilst pregnant after a thorough medical check. It’s always worth making an enquiry just in case. 

Can I take out critical illness cover for my children?

No parent wants to think of worst case scenario situations regarding their children, and it can be tough when considering if critical illness cover is needed for your child. However, you can take out critical illness insurance for your child. It can provide peace of mind that you’ll be able to afford medical and living expenses if your child was to fall seriously ill. 

You cannot buy children’s critical illness cover as a standalone product, you’ll need to add it to your life insurance or critical illness policy. It works very much the same as adult critical illness cover, and it's worth discussing with an advisor as to whether you feel it’s worth taking out. 

Does life insurance include critical illness?

No. Critical illness cover isn’t usually included in life insurance as standard. However, you can definitely purchase both critical illness cover and life insurance at the same time. This is why you have the option to combine critical illness cover with life insurance (with only one pay out) or purchase it in addition. 

Is COVID-19 covered as a critical illness?

Most insurance companies have not classed COVID-19 as a critical illness. The good news is that most people who contract the virus go on to make a full recovery. However, the people who do sadly pass away will be covered by their life insurance policy. 

Critical illness policy claims could be considered under unique circumstances for COVID-19. For example, “respiratory failure” and “intensive care” could be significant enough if you contract the virus to justify a critical illness claim. However, this is done on a case by case basis. If you feel that you need to make a claim and have COVID-19, it’s worth discussing with your insurance company. 

27th August 2020