Understanding Critical Illness Cover

Do I need critical illness cover?

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Our guide explains all you need to know about this important form of financial protection.

What is critical illness cover?

Critical illness cover is a form of insurance that is designed to pay out a tax-free lump sum in the event that you are diagnosed with a specified illness or medical condition during the term of the policy.

It can provide peace of mind that you don’t have to worry about your financial situation at what is already likely to be a stressful time.

Critical illness cover is an extra form of protection in addition to a standard life insurance policy, and can be added to a policy you already have, or are about to take out.

Why do I need critical illness cover?

If you don’t have significant savings, critical illness cover can provide valuable financial support in the event that you become seriously ill.

Your lump sum pay-out could be used to cover some of the following costs:

  • All or part of your mortgage
  • Lost earnings while unwell
  • Household bills and other outgoings
  • Private medical care or specialist treatment

Don’t assume that if you don’t have dependants you don’t need cover. If you live on your own, for example, you will need to ensure any rent or mortgage commitments are paid each month.

The last thing you want is to have to worry about keeping the roof over your head when you are unwell, recovering from injury or adapting to incapacity.

How much does critical illness cover cost?

The price of life insurance with critical illness cover really depends on whether you shop around, and at what stage of life you are taking the policy out. The earlier you take the policy out, the cheaper it is likely to be. For example a level term life insurance policy that includes critical illness cover for someone aged under 25 is £12.60 on average, according to MoneySuperMarket data collected from January to April 2018.

Similarly, it stands to reason that the longer you wait to add critical illness cover, the higher the cost - and it rises dramatically once you’re over 65. The same data stated that the average cost of a decreasing life insurance policy with critical illness for someone aged 30 to 35 is £31.29, but it almost quadruples to £124.49 once you hit 46 to 65 years old.

What does critical illness cover?

"Don’t assume that if you don’t have dependents you don’t need cover. If you live on your own, for example, you will need to ensure any rent or mortgage commitments are paid each month."

Critical illnesses must cover certain ‘core’ conditions: cancer, heart attack and stroke.

However, policies vary widely in terms of other conditions they might cover. For example, the most comprehensive policies may cover you for around 40-50 illnesses, including conditions such as multiple sclerosis, Alzheimer's, deafness, blindness or loss of limbs.

Always read the small print before buying, so that you understand exactly which illnesses are included, as well as those which aren’t.

It’s worth remembering that certain lifestyle choices could affect the price of your premium. If you’re a smoker, you will generally find yourself paying more than non-smokers. When it comes to critical illness cover, the difference can be significant: smokers pay an average of £80.88, compared with just £54.81 for non-smokers – that’s a saving of £26.07 every month.

Smokers pay much more for life insurance

MoneySuperMarket data for January to April 2018, showing how much extra smokers pay for level and decreasing term life insurance with and without critical illness cover. Correct as of April 2018.

What should I consider when buying a critical illness policy?

1.          Level of cover

Although cost will obviously be a factor when choosing a critical illness policy, the cheapest option may not necessarily be the best. It’s vital that you opt for a policy which provides a level of cover you’re happy with, so always check to see the conditions covered.

Some policies can offer additional benefits. These can include mastectomy cover, low grade prostate cancer cover, or accidental hospitalisation benefit. All of these may pay out smaller lump sums if you qualify, without affecting your overall benefit.

2.      Policy add-ons

Bear in mind that policies that seem to cover very unusual illnesses may not be worth paying over the odds for, as you are less likely to claim for one of these conditions.

Look for policies which offer ABI+ Definitions. This means that the critical illness definitions shown on the policy exceed the definition set by the Association of British Insurers (ABI), the trade body for insurance companies.

In theory, this should make it easier to submit a successful claim for that particular condition, as ABI+ definitions are wider than the industry standard.

Many critical illness policies automatically include total and permanent disability cover, but it also might only be offered as an extra for which you will be charged an additional premium.

If you opt for this cover, it will pay out for any condition which leaves you totally and permanently disabled, even if that condition isn’t listed within the policy.

3.      Protection for children

If you have children, then you may want to consider adding children's critical illness cover to your policy. This will usually pay out a small lump sum, typically between £15,000 and £25,000, if your child is diagnosed with one of the illnesses specified on the policy.

4.      Likelihood of making a claim

Statistically, according to the Association of British Insures (ABI), we are five times more likely to claim on a critical illness policy than a life insurance policy before the age of 65. This is why life insurance is generally less expensive than critical illness cover.

However, even though it might cost more, it could prove invaluable, especially if you know you and your family would struggle to make ends meet if you couldn’t work due to a serious health condition.

Making a claim

Protection insurance policies, such as income protection, life insurance and critical illness cover, have a high percentage of claims payouts. Insurers have to make their claims data publically available, which is worth taking a look over when deciding which provider to go for.

The ABI found that in 2017, a record £5 billion was paid to British households. The data below, taken from the same report from ABI, shows the number of claims made in the same year and how many of them were successfully paid out.

Policy type

Number of claims paid*

% of new claims paid

Average value of claim paid

Critical illness cover




Life insurance




Critical illness cover vs terminal illness cover

Don’t confuse critical illness cover with terminal illness cover. Life insurance policies usually include terminal illness cover as standard and so will pay out the sum assured if your doctor has confirmed you have a terminal illness and are likely to die within 12 months.

Critical illness, however, is designed to cover serious health conditions from which you might recover.

Compare critical illness cover

Once you’ve decided you want to be covered for critical illness, the next step it to compare life insurance quotes from different providers. The cost of life insurance premiums can vary significantly, and comparing different offers from a variety of providers means you’re much more likely to find the right policy for you at a great price.

When you compare critical illness cover, you can also see what the premiums would cost if you were to remove this option and buy life insurance alone. But don’t shop on price alone – you should also compare critical illness insurers by factors such as level of cover or customer reviews.

Buying Life Insurance at MoneySuperMarket infographic

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