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Do you need critical illness cover?

You may have come across critical illness cover when looking at life insurance plans but what exactly is it? Critical illness cover is an insurance policy that will pay out a cash lump sum in the event that you are diagnosed with a serious medical condition.

While critical illness cover is useful, it may not be something that everyone chooses to have. This could be because you don’t want to pay out for it, can’t find the right policy or just don’t really understand how it works.

Our critical illness insurance experts have written this quick and easy guide to explain more about what critical illness cover is, how it works and if it’s something that may be useful for you and your family.

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60-Second Summary – Do you need critical illness cover?

In this guide, we will break down what exactly critical illness cover is and answer the common questions many people have. After this, you should be able to make a more informed decision on what critical illness cover is and if it is suitable for you.

  • Critical illness cover policies will pay out a tax-free lump sum if you are diagnosed with a serious medical condition – the condition must meet the definitions set out in your policy documents.
  • Critical illness cover works as a financial safety net, helping to ease the pressure and cover those important expenses at a difficult time. This gives you the financial support you need while you adjust to recovering from or living with your diagnosis.
  • The number of medical conditions covered will vary depending on the provider and policy you choose. There are around 36 medical conditions that will be covered in most critical illness insurance policies – and some comprehensive ones will cover more than 150.
  • Consider carefully how you would cope financially if you were to become seriously ill and if you have enough savings to support you. You can speak to a critical illness cover expert for free advice and support in finding a critical illness cover policy if you think this is the right option for you.

What is critical illness cover?

Life insurance pays out money to your loved ones when you die but you can also opt for an extra form of protection. This is called critical illness cover. It is a form of insurance that is intended to pay out a tax-free lump sum if you are diagnosed with a disability or serious medical condition.

This is not the same as regular life insurance cover (which is designed to pay out money when you die) and can be taken out alongside it – or you can take it out by itself.

Critical illness cover (or critical illness insurance) is aimed to ease an often difficult financial situation that can arise during a stressful and upsetting time.

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Why do you need critical illness cover?

One of the last things you want to think about while going through a devastating illness or being diagnosed with a disability is: “How am I going to pay for this?”

Critical illness cover forms a safety cushion for this exact reason, especially if you don’t have a substantial amount of savings that you can draw upon in an emergency. Unlike regular life insurance cover, the money will be paid to you and not to your dependents or loved ones.

Importantly, the money can be spent as you see fit. For example, you can use critical illness cover to pay:

  • Your mortgage or rent
  • Daily living expenses
  • Household bills
  • Specialist medical treatment
  • On your children

Overall, it is there to give you one less thing to worry about at a time when everything from, how you are going to pay the bills to your health, is under question.

The types of critical illness cover

There are two main types of critical illness cover and it is important to consider which one is right for you. They are:

  • Additional critical illness cover – If you are diagnosed with a critical illness or permanent disability you will get a payout in addition to the payout when you die.
  • Combined critical illness cover – You will only receive one pay-out, even if you become critically ill and die within the term. If you become critically ill you will get a payout but then you will not be covered from then on.

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First, we need to establish what we mean by a “critical illness.” Insurance companies generally define this as an illness that causes long-term and serious damage. This is not the same as a “terminal illness,” and the exact difference between the two policies will be discussed later in the guide.

The specific critical illnesses or disabilities covered will differ from policy to policy, but common examples include:

How much does critical illness cover cost?

As with regular life insurance, there isn’t really an average cost for critical illness cover. The amount you pay will depend on a number of main factors. These include:

  • Age
  • Lifestyle
  • Personal and family medical history
  • What you do for a living

There is another factor that will affect the cost of your cover and that is the level of cover you choose to get. By the level of cover, we mean the conditions that are covered in the policy.

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Here are some of the most common questions that our customers ask us when thinking about critical illness cover.

What about protection for children?

It is not pleasant to consider what will happen if your child becomes ill. However, it can be advisable to have some kind of cover in place so if an emergency does happen, you can focus all your attention on your child without worrying about how to pay for medical expenses.

This is why some parents buy children’s critical illness cover in addition to their existing plan. This pays out a small lump sum if your child is diagnosed with a critical illness listed on the policy.

Does it matter if I’m a smoker?

As with regular life insurance, your medical history and lifestyle will be taken into account; which includes smoking. For smokers, the monthly premiums may be higher than that of a non-smoker. This is because smoking has a significant effect on your health and any future health issues you may have.

If you have quit smoking for 12 months, you may find that the premiums are lower than they would have been a year ago.

How does pregnancy affect critical illness cover?

If you apply for critical illness cover while pregnant, you may be asked to wait until after the child is born before your application is considered. This is because there are certain health risks that only come from pregnancy and so the factors that are affecting you now, may not be an issue in a few months. If you become pregnant while already on critical illness cover, the cover will not be affected.

What happens if I am already critically ill?

When you apply for critical health cover, your insurer will discuss your medical history with you. This includes any illnesses you currently have. Your insurer will also look at the likeliness of you contracting a further illness. This does not mean that you cannot get cover but you may be directed toward a different type of insurance.

What is the difference between critical illness cover and terminal illness cover?

Although critical illness and terminal illness both refer to serious medical conditions, they are both completely different products when it comes to life insurance. In insurance terms, a terminal illness refers to a condition where you are diagnosed to pass away within 12 months whereas critical illness refers to a severe condition that you may recover from or doesn’t severely shorten your life expectancy.

How to compare critical illness cover quotes

If you’re looking for the best prices for critical illness cover, the best thing to do is to compare quotes from multiple insurance providers. This allows you to see all of your options and make sure you don’t end up paying more than you need to for the level of cover that you want.

The easiest way to compare critical illness insurance quotes is to talk to a critical illness cover specialist. An expert will be able to quickly compare quotes from across the markets and find the lowest prices and most suitable policies for you.

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Related articles

Useful resources

Citizens Advice – Critical Illness Insurance 

Which? – Critical illness insurance explained 

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Is it worth paying for life insurance?

Yes, if you’ve got children or financial dependents then you should have life insurance to protect them if you die. Martin Lewis and the Financial Conduct Authority recommend that you take out life insurance to protect your family and your home. Generally, life insurance premiums start from as little as £5 per month and will be cheaper for younger adults.

Common myths about life insurance:

  • Life insurance won’t pay out (pays out 98% of claims)
  • People with medical conditions can’t have life insurance
  • Life insurance is expensive
  • Savings can be just as effective as life insurance
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What is the average cost of life insurance per month?

Based on recent research carried out, the average cost of life insurance is approximately £38 per month and the average level of cover is £152,000. Life insurance premiums also vary dramatically from one insurance provider to another and you can reduce your monthly premiums by shopping around.

Fundamentally, life insurance premiums vary depending on your age, health and the amount of cover that you need, starting from as little as £5 per month. You can also get life insurance to protect your family and your home against financial loss if you die.

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Average cost of life insurance - iam|INSURED

What does life insurance cover you for?

Life insurance is a monthly renewable ‘term insurance’ contract that pays out a cash lump sum or regular payments on death to your family or beneficiaries. Policies are most commonly used for family protection or mortgage protection for your loved ones if you die and your household income reduces, plus the additional issues of losing a parent or carer.

Traditional life insurance will not exclude any pre-existing medical conditions and will cover suicide after 12 or 24 months. You can also use life insurance for business protection purposes as well as tax-efficient business life insurance for directors or key people.

What are the disadvantages of life insurance?

The biggest and most common problem that consumers have with life insurance is the cost and the monthly premiums. This is the top reason for policy cancellations and why more people don’t take out life insurance to protect their family.

Another key disadvantage with life insurance is that it holds no investment value, nor can you cash it in. Life insurance works like any other traditional general insurance policy (e.g. car insurance, house insurance, pet insurance etc.), you pay a monthly premium and it will pay out in the event of a claim. Some people decide to use savings instead of taking out life insurance but you need to make sure that you have sufficient savings to cover the costs of death for your family.

Why do I need life insurance?

The fact is that nobody actually ‘needs’ life insurance, but it is strongly recommended that families and couples have cover to protect their loved ones in the event of death. Martin Lewis recommends life insurance and says “this is something that every parent, partner, or person with any other type of dependent needs to consider”.

Life insurance financially protects your loved ones if you die and pays out a cash lump sum to repay your mortgage, pay for school fees, replace lost income, and pay for regular outgoings. Mortgage life insurance is not linked to your mortgage debt so you can use it to pay off some or all of your mortgage.

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At iaminsured.co.uk, we believe in much more than just insurance policies; we believe that everyone is unique and should be treated with the fairness that they deserve. We also believe in providing the very best financial protection, and giving you peace of mind to continue with your busy life without the stress or worry of what might happen.

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