Critical illness cover supports you financially if you’re diagnosed with one of the conditions included in the policy. The tax-free, one-off payment helps pay for your treatment, mortgage, rent or changes to your home, such as wheelchair access, should you need it. Find out how it works, when you need it and what you need to think about when buying it.
What’s in this guide
Which illnesses does it cover?
Critical illness insurance will pay out if you get one of the specific medical conditions or injuries listed in the policy. It only pays out once, after which the policy ends.
The conditions and illnesses covered can vary significantly between different insurers. The most comprehensive policies cover 50 different conditions or more, but others are much more limited.
Examples of critical illnesses that might be covered include:
- stroke
- heart attack
- certain types and stages of cancer
- conditions such as multiple sclerosis
- major organ transplant
- Parkinson’s disease
- Alzheimer’s disease
- multiple sclerosis
- traumatic head injury.
Most policies will also consider permanent disabilities as a result of injury or illness.
Some policies will make a smaller payment for less severe conditions, or if one of your children has one of the specified conditions.
But not all conditions are covered. Common exclusions include:
- non-invasive cancers
- hypertension – abnormally high blood pressure
- injuries such as broken bones.
Most policies will also state how serious the condition must be to qualify for a payout.
When do you need it?
If you’re unable to work due to a serious illness, you might assume that your employer will continue to give you some level of income, or that you’ll be able to rely on benefit payments.
In reality, however, employees are usually moved onto Statutory Sick Pay within six months.
State benefits might not be enough to replace your income if you’re no longer able to work.
If you qualify, Employment and Support Allowance ranges from £74.70 a week to a maximum of £113.55 a week (2021/22 figures).
Find out more about Employment and Support Allowance on GOV.UKOpens in a new window
Consider getting critical illness cover if:
- you and your family depend heavily on your income
- you don’t have enough savings to tide you over if you become seriously ill or disabled
- you don’t have an employee benefits package to cover a longer time off work due to sickness.
You might not need it if:
- you have enough savings to cover ongoing expenses such as bills, rent or mortgage payments
- you have no financial commitments, such as a mortgage, or dependants
- you have a partner who can cover living costs and any shared commitments, such as a mortgage
- you already have some cover as part of your employer’s employee benefits scheme.
What affects the cost of critical illness cover?
Monthly payments (premiums) can vary widely, depending on the policy and your circumstances.
Critical illness policies cover a wide range of illnesses, conditions and situations. So it’s important to compare what different insurers can offer you.
Cost is affected by:
- your age
- whether you smoke or have smoked
- health – your current health, weight and family medical history
- job – some occupations are higher risk than others, making the premiums higher too
- level of cover.
If you’re considered at risk of a particular condition – perhaps because of existing health issues – that illness could be excluded from the policy. Or you might have to pay a higher premium.
The cost will also depend on whether you pay a reviewable or a guaranteed premium.
Reviewable premiums are usually reviewed after a certain period of time, usually every five years. At each review point, they’re likely to increase.
Guaranteed premiums remain fixed for as long as you have the policy. These can cost slightly more in the short-term. But many people like the security of knowing what they’ll be paying in future.
How much critical illness cover do I need?
Critical illness insurance is typically taken out alongside other types of insurance, such as life insurance or income protection. It’s often combined with a life insurance policy.
The amount of cover you need will depend on:
- debts
- dependants
- work benefits
- take-home pay
- mortgage/rent payments
- other insurance products you have.
You can adjust the amount of cover you take out according to your needs and monthly payments.
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How do I buy critical illness insurance?
This is a potentially complicated product, and there can be a lot of stress and heartache when a claim isn’t paid out.
The best way to get what you need is to get advice from an independent financial adviser or specialist broker. They can take you through the details of the various policies available and make sure you choose the right one.
They might charge a fee for their services, or they might be paid in commission by insurance companies.
There are also specialist brokers and insurers for people who have had insurance applications turned down, perhaps because of an existing medical condition.
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Five things to think about when buying critical illness insurance
1. Be honest about your medical history
It’s important to give your insurer all the information they ask for. When you make a claim, the insurer will check your medical history. If you didn’t answer truthfully or accurately in your application, or you didn’t disclose something, your claim might be rejected.
2. Read the small print
Take your time reading and completing the application. Make sure you know exactly what is and isn’t covered. Be aware that definitions and exclusions (what isn’t covered) can vary between different insurers. If you see something you don’t understand, ask the insurer, an insurance broker or a financial adviser.
3. Consider a waiver
If you pay a bit extra to add a ‘waiver of premium’ to your policy, your monthly premiums will be covered automatically if you can no longer work due to illness or injury. This is to protect against your policy being cancelled if you miss a monthly payment. However, it usually kicks in only after you’ve been off sick for at least six months.
4. You can change your mind
You have 30 days from buying the policy to change your mind and get a full refund.
5. Can you switch to a better deal?
It’s always worth looking around for a better deal, particularly while you’re still in good health.
You can either switch to another provider or stay with the same one and change policy. Either way, make sure you understand any changes in the new policy details and the conditions they cover.
Also, be aware that you might find yourself paying a little more, even with a better deal. This is because you’ll be older than you were when you bought the first policy.
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How to cancel critical illness cover
You can ask your insurer to cancel your policy at any time, but there are a few things to be aware of:
replacement cover might be more expensive as prices generally increase with your age
if you have pre-existing medical conditions, they might not be covered by a new policy
you won’t be able to reinstate the policy once it’s cancelled.
There are usually no cancellation fees, so you’ll just stop paying for it – you won’t receive a refund of any premiums you’ve already paid.
Ask your insurer for helping you're struggling to pay
If you’re considering cancelling due to cost or affordability, it’s important not to cancel insurance you need – or to miss a payment. Instead, contact your insurer and tell them you’re struggling.
Insurers must support customers in financial difficulty, so they’ll explain your options and ways they can help. For example, they could set up an alternative repayment plan or adjust your cover to match your needs and lower the cost.
