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 one of the specific medical conditions or injuries listed in 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.

Be aware that not all conditions are covered, and policy will also state how serious the condition must be.

Critical illness cover is not the same as life insurance – it’s an extra form of protection that can be added to a standard life insurance policy that you already have, or are about to take out. It can also be bought stand-alone.

Critical illness cover vs terminal illness cover

They may sound similar, but critical illness cover and terminal illness cover are different products. Terminal illness is covered under life insurance, but critical illness cover is an extra.

Critical illness cover helps to support you and your loved ones financially if you've been diagnosed with a specific condition. You'll receive a lump sum payment to help cover the costs of treatment, or to help pay the bills if you're not able to work.

Critical illness insurance usually doesn't pay out if you pass away – this is where life insurance comes in.

In most cases, life insurance only pays out if you pass away or contract a terminal illness during the term of the policy. It's designed to help your family to maintain their lifestyle after you've gone (for example, by covering mortgage payments or children's university fees).

Which illnesses are covered?

Illnesses covered will vary between insurers, so it’s important to check the details of a policy before you buy.

Examples of critical illnesses that are usually covered include:

  • Stroke
  • Heart attack
  • Certain types and stages of cancer

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:

  • Multiple sclerosis
  • Alzheimer’s
  • Deafness
  • Blindness
  • Loss of limbs

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

What types of critical illness cover are there?

When you take out critical illness cover, it’s usually either in addition to or combined with your life insurance policy:

  • Additional cover: If you take out life insurance with separate critical illness cover, you’ll receive a pay-out a) if you get a critical illness b) if you pass away (both during the term of your policy)
  • Combined cover: If you take out a combined policy, you’ll only receive one pay-out, either if you become critically ill or if you pass away (during the term of your policy)

MoneySuperMarket offers you the option to add critical illness insurance as additional cover once you have completed a life insurance quote, with the premium calculated using the information you gave when applying for life cover. We believe this provides a more flexible and comprehensive solution than a combined policy.

The table below shows the percentage of people that opt for each policy:

Policy Type

Proportion

Life only

75%

Life with critical illness cover

25%

Data collected by MoneySuperMarket between June 2019 and May 2020, correct as of July 2020.

Try using our life insurance calculator, which can help you figure out how much cover you may need.

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
  • If you have children, you may want to ensure your family is provided for if you can’t work due to ill health

Even if you don’t have dependants, you could still benefit from a critical illness policy. 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.

Should I get critical illness insurance?

You might be asking yourself if critical illness cover is worth it - most people could benefit from a critical illness policy, but the impact of the premium and the benefit of the payout will vary from person to person.

You need to weigh up the monthly cost against the benefits of a payout. If you and your family depend heavily on your salary, it could be exactly the kind of protection you need.

If you have no financial commitments or dependents, critical illness insurance may not be necessary.

How much does critical illness cover cost?

The price of life insurance with critical illness cover depends on a number of factors, including:

  • Your age
  • Your level of cover
  • Your lifestyle, such as whether you smoke or not
  • Your health and medical history
  • Your occupation

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 £8.18 on average, according to MoneySuperMarket data collected from June 2019 to May 2020.

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 reach your later years. The average cost of a level life insurance policy with critical illness for someone aged 45 to 54 is £37.37.*

Does smoking affect life insurance premiums?

It’s worth remembering that certain lifestyle choices could affect the price of your premium. If you’ve quit smoking for 12 months, you could find yourself paying less than someone who does smoke.

If you’re a smoker, you will generally find yourself paying more than non-smokers. When it comes to life insurance, the difference can be significant: smokers pay an average of 76% more than non-smokers.**

* According to data collected by MoneySuperMarket from June 2019 to May 2020, for a single level life insurance with combined critical illness per £100,000 of cover bought

**According to data collected by MoneySuperMarket between June 2019 and May 2020, accurate as of July 2020

What should I consider when buying a critical illness life insurance policy?

  • 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 that 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.

  • Wider definitions of illnesses

It might be a good idea to look for life cover that includes 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.

Some critical illness policies automatically include total and permanent disability cover, however others may only be offered as an optional addition, which means you’ll have to pay extra.

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.

  • 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.

Can you get cover after being diagnosed? 

Most insurers will ask you for your medical history when you take out critical illness cover. If you do have a pre-existing condition, make sure you let your insurer know when you apply for your policy.

It doesn't necessarily mean you won't be able to get cover, but as some conditions can make you more likely to suffer from further illness, your insurer could decide not to accept you for critical illness cover.

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.

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