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What are the disadvantages of critical illness insurance?

Many guides online will break down the perks of critical illness insurance and how it can be a financial lifeline for you and your family if you ever face a serious health condition.

But just like with any insurance policy, there are a couple of downsides worth knowing about before you start applying. Doing your research and getting all the information beforehand can help you to be completely certain that critical illness insurance is the right choice for you.

The aim of this guide is to explain some of the downfalls of critical illness insurance and to bust the most common myths about what critical illness cover is and what it does.

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60-Second Summary – What are the disadvantages of critical illness insurance?

Our critical illness insurance experts have written this guide to explain all the main pros and cons of critical illness insurance and help you work out if it’s the right type of policy for you.

  • While critical illness cover is a useful policy for providing financial protection, there are some disadvantages that you need to think about before applying.
  • Critical illness insurance policies won’t pay out for pre-existing medical conditions or for conditions that don’t meet the exact definitions set out in your policy.
  • Critical illness insurance policies vary massively in the number of conditions covered, depending on the insurer you choose. This can make it harder to compare the benefits of these policies without getting some extra advice.
  • It can be more difficult to find a fair price for critical illness cover if you have health issues or a risky hobby or occupation. The best option in this situation would be to speak to an insurance expert who will know which insurers will be most affordable for you.

There are a few features of critical illness insurance (also known as critical illness cover) which are important to know about and understand before you buy a policy. While critical illness cover is useful, it won’t protect you in every situation.

Here’s a few of the main things that critical illness insurance typically will not pay out for:

  • Medical conditions you had before you applied for your policy (pre-existing medical conditions)
  • Any medical conditions that are not specifically covered by your policy (the conditions covered will be highlighted within your policy documents)
  • Conditions that don’t meet the exact specifications within your policy documents (e.g. a heart attack with less severe symptoms)

It can also be more difficult to compare critical illness insurance across providers than it would be for other policies like life insurance. This is because the number of conditions that are covered and any extra features included can vary dramatically between insurers.

A good starting point would be to consider factors like:

  • What level of cover you need
  • How much cover you can afford
  • If you want extra protection added (e.g. children’s cover)
  • Customer reviews (e.g. on websites like TrustPilot or Feefo)
  • Insurance claim payout statistics
  • Claims process
  • Do you have medical conditions? (Pre-existing conditions will not be eligible for a payout but may affect the price of cover)

Many people who are interested in buying critical illness insurance find it useful to talk to an insurance specialist before they apply. A critical illness insurance expert will be able to quickly compare prices and policies across the market to figure out which policies will work best for you.

Extra financial security in the case you cannot work due to serious illnessNumber of conditions covered will vary between providers and policies
Options for standard or enhanced cover to suit different budgetsIt can be hard to work out the best options for cover without extra advice
Tax-free cash lump sum paid on diagnosis of a condition covered by your policyCover can be more expensive for people with medical conditions, hazardous jobs or hobbies if you don’t choose the right insurer
Often includes extra benefits or the option to add on features like children’s coverYou will normally only be able to claim once (or a limited number of times if specified) and then your cover will end
I am not going to get ill enough to need to make a critical illness claim

Most people don’t want to think about the possibility of becoming seriously ill, but the truth is that this is something that can happen to anyone.

While you ideally don’t want to have to claim on your policy, it can be useful to have critical illness insurance for extra financial support at a hard time.

Critical illness policies will allow you to claim for a wide range of different conditions, with some insurers paying out for more than 100 conditions. The conditions covered will very though, so it is a good idea to read your policy documents carefully to know what you can and can’t claim for.

A critical illness policy is only designed for terminal illnesses

There can be some confusion between terminal illness benefit and critical illness cover and often people believe they are the same thing.

Critical illness cover is designed to pay out a cash lump sum if you are diagnosed with a serious medical condition that is covered by your policy. Terminal illness benefit is usually included as a part of life insurance policies and will pay out if you are diagnosed with a terminal illness (life expectancy 12 months or less).

You don’t need to be terminally ill to claim on a critical illness insurance policy, meaning you can benefit from your policy more easily. You cannot buy a new critical illness cover policy if you have been diagnosed as being terminally ill, which is standard for all life insurance products.

You don’t need critical illness cover on top of a standard life insurance policy

Understandably, if you already have a life insurance policy you may wonder whether it is worth also taking out critical illness cover. There are definitely benefits to having both policies in place – the main one being the added protection for yourself and your family.

Having both life insurance and critical illness cover means that your family can receive support with both serious illness diagnosis and if you were to die. Many people find it helpful to have both policies for peace of mind that their family would have financial protection in both situations.

I don’t need critical illness cover if I don’t have a mortgage

Critical illness cover was initially designed to help you cover your mortgage repayments if you became seriously unwell and couldn’t work.

However, these policies have evolved a lot since then and many people without mortgages still find it helpful to have critical illness cover. Critical illness pay outs can help cover various other expenses like rent payments, utility bills and the cost of private medical treatments.

Critical illness cover is too expensive for me

Critical illness cover is often a lot more affordable than people think, with the average cost of critical illness insurance being around £25.16 per month.

While the price can vary based on factors like your age and health, there are some easy ways to save money on your policy. The best way is to compare prices across providers to make sure you get the best deal available.

If you’re finding it hard to find an affordable policy, it can be helpful to talk through your options with a critical illness insurance specialist.

Insurers can be difficult and will refuse to pay out for no reason

Many people in the UK are wary of insurance providers and don’t trust them to pay out when they should.

The good news is that most critical illness claims will pay out, with 91.6% of claims being approved on average. While there is a small chance your claim could be declined, this doesn’t happen as often as you may think. This is according to figures published by the Association of British Insurers for claims in 2022.

All insurance companies are regulated by organisations such as the Financial Conduct Authority (FCA), meaning they have to follow set rules and regulations. They legally cannot decline your claim without a valid reason.

If you do think your claim has been unfairly refused, you always have the right to complain to your insurance provider. If you’re unhappy with the outcome of this complaint, the Financial Ombudsman Service may be able to help you get compensation if they believe you have been unfairly treated.

I can’t get critical illness cover if I have pre-existing medical conditions

In most cases, you will still be able to buy critical illness insurance if you have pre-existing medical conditions. This is usually easier though if you get the right advice and support before you apply.

You normally won’t be able to claim for any medical conditions you already had when you bought your policy, and sometimes will not be able to claim for related conditions that develop later.

The best way to find the right critical illness cover if you have medical conditions will be to speak to a critical illness cover specialist for support and guidance. They will be able to explain which insurers are most likely to approve your application and which ones are currently offering the lowest prices.

All illnesses are covered by critical illness cover

Insurers will have a set list of medical conditions that they will pay out for within their critical illness insurance policies. No insurer will cover every possible medical condition and there will usually be set ‘definitions’ for the conditions that they do cover and when they will or won’t pay out.

It’s always important to check your policy documents carefully, so you have a full understanding of which medical conditions you are covered for.

There are a wide range of critical illness policies available in the UK and each one will cover a different number of medical conditions. You should choose the policy that offers a level of cover that feels right for you and one that is realistically affordable for you long term.

I am young, so I don’t need critical illness cover

While it is true that we are more likely to be diagnosed with medical conditions as we get older, it’s not impossible for this to happen when we’re young.

Another thing to consider is that insurance policies are normally cheaper for people who are younger. Buying your policy when you are young can often mean paying less for your cover, so it is generally recommended to get cover as early in life as you can.

I can get sick pay, so I don’t need critical illness cover

People who are employed in the UK will usually be entitled to Statutory Sick Pay (SSP) if they need time off work due to serious illness. However, this will likely only pay out a fraction of your usual income and is often not enough to cover regular expenses like mortgage or rent payments.

A policy like critical illness insurance will pay out a tax-free lump sum which can be a significant amount of money (e.g. £25,000, £50,000). A payment like this is far more likely to support you for longer and can help cover all your important bills while you recover or adapt to your medical condition.

More information – Statutory Sick Pay – How does it work?

No matter where you are in life, there’s always a chance that you could face a serious or ‘critical’ illness. It’s not the easiest topic to think about, but it’s something worth considering especially if you have children or a mortgage.

That’s why options like critical illness insurance are available – they’re there to help out and give you and your loved ones some peace of mind if something like this happens.

Critical illness cover provides a cash lump sum to help you and your loved ones cope financially with the impact of a serious medical condition. There’s also a wide range of policies on the market, so you can choose the one that works best for your budget and the level of cover that you need.

More information – Is critical illness insurance worth it?

Is critical illness cover worth it Martin Lewis?

Many UK consumers will turn to Martin Lewis for financial advice as he is a trusted financial journalist who often speaks publicly about financial products like insurance.

The guidance available on his website MoneySavingExpert.com states “we’re not big fans of critical illness insurance as many believe they will pay out if you get ANY serious illness and can’t work”.

While this comment is technically true, it doesn’t fully explain why critical illness cover does work for some customers even if not for others. Martin Lewis doesn’t say not to buy critical illness insurance, just that you should properly understand the policy you are buying which is fair.

More information – Martin Lewis Critical Illness Cover

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Critical illness cover is designed to provide a tax-free cash lump sum payout to you if you are diagnosed with a serious illness or medical condition during the term of your policy.

This can be helpful to give you some additional financial support at a time when you may greatly need it. You can use the money you receive to cover any expenses such as:

  • Mortgage or rent payments
  • Cost of living for a period of time
  • Adjustments to your home
  • Treatment to help your condition

There are two types of critical illness cover:

  • Standard (core cover) – These policies will usually cover up to around 75 different critical illnesses.
  • Enhanced cover – These policies will usually cover anywhere up to 182 critical illnesses, depending on the insurance provider you choose.

The illnesses that are covered will depend on each individual provider, so it is always worth checking the specifics of your policy before agreeing to it. Typically, most insurers will cover at least 36 main medical conditions including the most common reasons for critical illness claims (cancer, stroke and heart attack).

What cancers are not covered by critical illness insurance?

Cancer is covered as standard with most critical illness policies, but you may not always be eligible to claim depending on the type of cancer you have.

Many insurers will specify either lower pay outs (or no pay outs) for less advanced cases of cancer that are known to be more easily treatable. This most commonly will be cancers like breast cancer or prostate cancer that are caught in the early stages.

All insurers vary in what critical illnesses they cover, so if you are unsure you should read your policy documents carefully. You can also contact your insurer to check, if you think you may be able to claim.

Can I buy life insurance with critical illness cover?

YES – It is very common to buy critical illness cover as an add on to a life insurance policy. Many life insurance customers choose to add on critical illness for an added level of protection for themselves and their family.

There is no rule to say that you must buy critical illness insurance from the same insurer that provides your life insurance. Certain insurers will allow you to buy critical illness cover as a separate policy (without being a life insurance customer) but not all will.

This will usually be explained on the insurer’s website, or you can contact an insurance broker who can explain which providers sell critical illness as a standalone policy.

What will life insurance companies class as a critical illness?

Insurance companies in the UK will usually class a critical illness as being an illness or condition which has serious and usually long term effects on your health.

The most commonly covered illnesses are cancer, stroke and heart attack. Every insurance will cover a varying number of conditions and will often specify how severe your symptoms need to be to qualify for a pay out.

Can you claim critical illness insurance on your taxes?

Critical illness cover is by design tax-free, which means you usually have access to the full sum owed to you if you need it. This is because these funds aren’t normally classed as part of your normal income and so won’t be taxed.

While critical illness cover is not a taxable benefit in most cases, you may be liable for tax if your employer pays for your cover for you. If you are unsure where you stand, it is worth getting in touch with a financial advisor to check.

Can you get critical illness insurance after cancer?

YES – It can still be possible to get critical illness cover, even if you have been diagnosed with cancer in the past. The key to finding a fair price will be to apply to the right insurance companies.

Some insurers in the UK are simply better than others for people with medical conditions, which is why it is important to compare quotes from multiple providers. If you’re finding it difficult to get the cover you need, you can speak to a critical illness cover specialist for help.

Note: Some insurers will agree to offer cover but won’t pay for any diagnosis of cancer or conditions related to your previous cancer diagnosis.

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Deciding whether to buy critical illness insurance is personal choice, and these policies won’t be the right fit for everyone. Some people may prefer using other financial support such as saving accounts or investments to fall back on if they become seriously ill.

There are also other types of insurance available that can support you financially in the event of serious medical conditions such as:

  • Income protection insurance – works to replace your income if you are signed off work by your doctor for 4 or more weeks. Flexible policy options mean you can choose to have regular payments for years at a time if needed
  • Personal accident insurance – will pay out a lump sum in the event of an accidental injury and is a cost effective alternative to income protection
  • Health insurance – helps to cover the cost of private medical treatment and often includes extra perks and discounts

If you do think that critical illness insurance is right for you, the cheapest and easiest way to do this will be to get proper advice from a specialist. A specialist insurance broker will have access to a wide range of policies and pricing and can help you compare the best available deals.

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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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Is life insurance worth it? - iam|INSURED

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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