What is critical illness cover?

Critical illness cover is a type of insurance which pays out a lump sum upon diagnosis of a specified illness during the term of the policy. Here, we explain how it works, what is covered, which factors determine how much premiums will cost, and how to claim.

Lisa Parker
June 26, 2023

How does critical illness insurance work?

Critical illness insurance is designed to provide you with financial protection if you suffer a serious illness. It is often taken out alongside life insurance when you apply for a mortgage, so that you have peace of mind that your loved ones would be able to pay back what is owed if you become seriously ill or die. Critical illness cover can also be bought as a standalone policy if you already have life insurance in place. Any pay out from a critical illness policy can be spent in any way you want, so you don’t have to spend it on your mortgage if you have other ways of covering your monthly payments. Proceeds from a claim could be used to pay for private treatment or modify your home for example. When you buy critical illness cover, you will need to provide the insurer with full details of your medical history. Depending on the policy, you may not be covered for any pre-existing medical conditions you have. You will also need to think about how much cover you need. When doing this, consider any savings you already have in place, as well as what benefits your employer might pay out if you’re unable to work due to serious illness or disability. Critical illness cover can either be for a fixed lump sum or, if you’re taking it out alongside a mortgage, you can arrange for cover to reduce in line with your mortgage balance, known as ‘decreasing’ cover.

How much does critical illness cover cost?

The cost of your premiums will depend on factors such as how old you are when you take the policy out, your health, your job, your hobbies, and your lifestyle. For example, if you’re older, a smoker, and aren’t in the peak of health, you’ll pay more than someone who is young, healthy and doesn’t smoke. Critical illness premiums are payable monthly, and if you don’t make a claim during the term of the policy, you won’t get any money back once the cover finishes. Premiums are usually guaranteed to remain the same throughout your policy term, unless you make changes to your cover. If you do need to make a claim, bear in mind that illnesses often have to have reached a specified severity for insurers to pay out. For example, if you’re diagnosed with cancer, they may only settle your claim if there is medical evidence that the cancer has become invasive.  

What is covered on a critical illness policy?

The types of illnesses usually covered by this type of policy include conditions such as cancer, multiple sclerosis, heart attack, strokes, blindness and deafness. Most policies cover at least 40 different conditions. Some of the more comprehensive policies may cover an even wider range of additional conditions including things like loss of limbs, Parkinson’s Disease, and Alzheimer’s, so if you’re considering buying this type of plan, it’s important to read the small print so that you understand exactly what you are and aren’t covered for. Many critical illness providers also automatically include critical illness cover for your children for no additional cost.  

How L&C can help

Our protection advisers can search the whole of the critical illness market on your behalf to help your find the right policy to suit your needs, at the right price. They will compare lots of different quotes to help you find the best possible deal, whether you are looking for life insurance with critical illness cover, or whether you want standalone critical illness cover. An adviser can also explain which other types of financial protection are available. For example, income protection cover pays a regular income if you’re unable to work due to sickness or disability. Some people opt for a combination of different types of protection, for example, life insurance with critical illness and income protection, but an adviser can help talk you through all the various options to help you decide which to go for.

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