Critical Illness Cover

If you were to become seriously ill and could not earn a living, would your family cope financially?

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Not a nice question, but an important one to ask. If you consider your loved ones might struggle to pay the mortgage, or meet the cost of running a household if you were taken ill, then perhaps you should consider critical illness insurance.

What is critical illness cover?

Critical illness cover is a form of insurance that pays out a tax-free lump sum in the event that you are diagnosed with a specified illness or medical condition.  The policy will pay out if you are diagnosed with one of a list of serious conditions within the policy term.

You can spend the money how you wish, so you could use it to clear any debts, pay for medical bills or to adapt your home to your particular needs.

How does critical illness cover work?

If you take out a 25-year policy with a sum insured for £100,000 only to suffer a stroke or another serious condition which may hinder your ability to work, you would be able to claim the money. In effect, this type of policy offers a financial lifeline in times of family crisis.

Many insurers also offer children’s critical illness cover at no extra charge, though the pay-out is usually limited to between £10,000 and £25,000.

You could invest some or all of the lump sum, to generate an income for your family to live on should you be unable to earn a wage. 

List of conditions

With any insurance policy, it’s important to read the small print carefully, so that you understand exactly what the policy covers.

The list of conditions may be long, with some insurance companies including more than 60 ailments, conditions and injuries. However, even if your illness is on the list, whether you get a pay-out could all depend on how severe or permanent the condition.

Some forms of cancer, for example, are not included because they are easily treatable and not seen as a large enough threat. Plus, some companies won’t pay the claim for cancer until it has reached a specified stage.

Similarly, a mild stroke or mild heart attack could be excluded on the basis of severity. So it’s always important to know what is and isn’t considered an ‘exclusion’, listed in the policy small print.

How many pay-outs am I covered for?

Most policies pay out only once, but a number of insurers will make a small payment if you are diagnosed with a less severe illness.

Your policy would then continue and, in theory, you could make a further claim down the line should you be diagnosed with a critical, more serious condition or illness.

The cost of cover

Make sure you can afford the premiums at the outset, because critical illness policies stop providing cover if you stop paying the premiums. Meaning you could be left without any help, should you become ill after you’ve stopped paying the policy.

Also, if you do not use the cover, there is no cash-in value to critical illness cover – you won’t get anything back if you survive to the end of term or stop the policy part-way.

As critical illness cover depends on how healthy you are, as you get older and unhealthier, the premiums will increase – due to your likelihood of making a claim.

Yet, you can often bring down the cost of cover by adopting a healthier lifestyle. For example, by losing weight or quitting smoking you are proving to the insurer that you are willing to improve your health generally, lessening the likelihood of a claim.

Should I get critical illness cover and life insurance?

You can make your critical illness cover cheaper by combining it with or buying it alongside normal life insurance. Some insurers do not even sell standalone critical illness cover. It is worth noting that there is normally only one pay-out. So, if you claim for a critical illness, you would not receive a further pay-out on death.

"As critical illness cover depends on how healthy you are, as you get older and unhealthier, the premiums will increase – due to your likelihood of making a claim."

According to MoneySuperMarket data, the average cost of critical illness cover, alongside a level term life insurance policy would set you back around £58 a month*.

Most premiums are fixed, but some companies offer so-called reviewable premiums. Which means the cost of cover can be regularly reviewed and could rise during the policy term.

Will my insurer pay out?

It’s is worth taking a look at the available data before you choose a critical illness cover policy. All insurance companies must publish information about their claims, so this is easy to get.  

The Association of British Insurers (ABI) found that in 2016 £4.7 billion was paid to British households which had some form of protection insurance policy (such as critical illness cover, life insurance and income protection).

The data below from the ABI shows the number of claims made in 2016 and how many of them were successfully paid out. 

Policy type

Number of claims paid*

% of new claims paid

% of new claims declined

Average value of claim paid

Critical illness cover





Life insurance





Full disclosure

In order to boost your chances of a successful claim, make sure you fill in your application carefully and accurately, answer all questions in detail – especially the medical questions. Claims often get refused because the policyholder did not disclose all the relevant health information.

*The average costs of a life insurance policy for £200,000, based on a 30 year old, non-smoker also taking out critical illness cover. 

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