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 – over one in three of all life insurance policies searched for include critical illness cover.
Life with critical illness cover
Data collected by MoneySuperMarket from January to November 2018, correct as of November 2018.
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.
What types of critical illness cover are there?
When you take out life insurance with critical illness cover, you can choose between:
- Additional cover: if you take out life insurance with additional critical illness cover, you’ll receive a pay-out if you get a critical illness as well as when you pass away.
- Combined cover: however if you take a combined policy you’ll only receive one pay-out, either when you become critically ill or when you pass away.
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 that aren’t.
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 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 £12.99 on average, according to MoneySuperMarket data collected from January to December 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 reach your later years. The average cost of a level life insurance policy with critical illness for someone aged 31 to 35 is £23.69.*
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 63% more than non-smokers.**
* According to data collected by MoneySuperMarket from January to December 2018, for a decreasing term life insurance with combined critical illness cover for a term length between 10 and 20 years, with a total amount of cover between £150,000 and £200,000.
**According to data collected by MoneySuperMarket between January and November 2018, accurate as of November 2018
What should I consider when buying a critical illness life insurance policy?
You should consider the following things before you take out 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.
Making a claim on critical illness life insurance
Protection insurance policies, such as income protection, life insurance and critical illness cover, have a high percentage of claims pay-outs. 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 £5bn 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.
Number of claims paid
% of new claims paid
Average value of claim paid
Critical illness cover
Data collected by the Association of British Insurers, accurate as of April 2018.
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.