The Disadvantages of
Critical Illness Insurance

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The Disadvantages of<br>Critical Illness Insurance

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The disadvantages of critical illness insurance 

Yes, you heard us right. We are going to speak to you about the disadvantages of one of the products we help you to buy. We’re straightforward people here. We will never lie or mislead you, with certain policies there are many pros but there are also cons.

Critical illness cover is one of those policies. 

In this article, we will talk you through what critical illness protection is, give you a few honest facts and let you make up your mind as to whether or not this is the right kind of policy for you. The customer is key, and we will always put your best interests at the heart of what we do. 

Critical illness insurance: what does it cover? 

If you are reading this, it is possible you already have a decent knowledge of what critical illness insurance is and how it works. Otherwise, you may be asking yourself “what is critical illness cover?”. 

For any of you who are unsure, we will now explain the basics of critical illness insurance.  

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, e.g. mortgage payments or rent, if you are unable to work due to being seriously ill. 

There are two types of critical illness cover: 

  • Standard: These policies will usually cover up to around 75 different critical illnesses, paying out 100% of the sum assured at the point of claim. 
  • Advanced: These policies will usually cover anywhere up to 182 critical illnesses, paying out 100% for serious conditions but dropping down to 10% depending on severity or impact on lifestyle. 

You can check out our page on critical illness cover, for further information on this topic.  

Life insurance with critical illness: what will insurance companies class as a critical illness? 

There are actually 36 main critical illnesses in the world of UK life insurance policies. The main ones that usually result in claims are cancer, heart attacks and strokes. Of course, there are many more than 36 critical or serious illnesses which may be covered by insurance providers.  

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. If you are unsure of what cover you may need or how extensive you want your policy to be, it’s best to do some research or speak to one of our experts. We can compare policies and providers to ensure you have the right protection in place to protect your family’s financial future.  

Pros and cons of critical illness cover 

Now you have some background on what critical illness cover is, we can dive into the pros and cons of this type of life insurance.  

We could go on all day about the benefits of critical illness cover. Ultimately, any kind of life insurance policy is the #1 way to protect yourself and your family in the event something happens to you. But we can acknowledge that with all the pros, there are a few cons to consider. 

We have put some of these together in a handy table to make it easy to digest and compare the main reasons you should, or shouldn’t, take out critical illness cover.  

Pros Cons 
Extra financial security in the case you cannot work due to serious illness Policies can occasionally be slightly more expensive than a standard life insurance policy 
There are different types of critical illness policy meaning you have options for the best policy to suit your needs. Depending on the provider, there may be some critical illnesses that specific policies don’t cover. It is always worth checking the specifics of any policy before agreeing to it. 
The money paid to you through a critical illness claim will be tax-free, meaning the whole sum can be used to help support you and your family at a difficult time. You can’t claim for a critical illness you already have at the time of taking out the policy. This is classed as a pre-existing condition by providers. 
Certain insurance companies may include extras such as children’s critical illness cover as an added bonus with their policies. Check with individual providers to see if they offer specific additional benefits with their policies. You do not have an unlimited number of claims you can make. If you are diagnosed with multiple different illnesses, most policies will not allow you to claim over and over again – there will be a set amount of times. 

Overall, we do believe that in most cases the pros outweigh the cons. The advantages of a critical illness policy, in most cases, should be great enough that things like paying a small fraction more or being unable to claim for certain specific things is a small concession to generally great cover.  

Critical illness exclusions 

So, as stated above there are things that you cannot claim for in certain critical illness policies. These are called ‘exclusions’. An exclusion in simple terms, is something an insurance provider will tell you that you cannot claim for at the point of taking out your policy – you are ‘excluded’ from doing so. 

What an exclusion is can vary depending on the type of insurance policy you are taking out. Usually with critical illness cover, an exclusion will be something like a pre-existing medical condition.  

Critical illness cover is designed specifically to pay out to you in the event you are diagnosed with a serious illness during the term of your policy. If you have already been diagnosed prior to getting a quote, insurers will refuse a claim based on this condition as it is pre-existing. However, if you are diagnosed with another medical condition once your policy is in place you should be able to claim for that, meaning that critical illness cover can still be beneficial to you. 

Can you claim critical illness insurance on your taxes?  

If you are looking for a policy that is tax-efficient then critical illness cover isn’t bad but it’s also not your best possible option. Critical illness cover is by design tax-free, which means you have access to the full sum owed to you if you need it. However, if you are looking for a policy solely based on tax-efficiency, critical illness cover isn’t the first policy we would think of. 

Depending on your circumstances, there are several other options that would be better for you. If you are a business owner for example, then something like relevant life insurance or business life insurance will offer you far more overall benefits. With these policies, you can receive things such as: 

  • Corporation tax relief on monthly premiums 
  • Income tax and National insurance relief 
  • Up to 49% overall tax savings 

There are also other options to consider in terms of tax and life insurance, such as the option of writing a trust into your life insurance policy. A trust is a way in which you can specify exact beneficiaries for your insurance pay out plus one or more trustees who will be in charge of ensuring your wishes are taken care of.  

With a trust, you can often avoid things such as inheritance tax (IHT) which can in some instances can take up to 40% of your estate, leading to massive savings for your beneficiaries.  

Can you get critical illness insurance after cancer?: Critical illness cover with pre-existing conditions 

Cancer is the most common reason for critical illness claims in the UK. 1 in 2 people in this country will be diagnosed with cancer at some point in their life. This is an astonishingly high amount of people affected by cancer.  

If you already have cancer or have previously had cancer, you should still be able to get critical illness cover. It may just be that certain providers would want to place an exclusion on cancer as part of your policy, meaning you cannot claim for it if it reoccurs.  

Whilst this is understandably frustrating, there are other types of policy you can put in place to cover cancer. Standard life insurance policies such as family life insurance or mortgage life insurance will generally still accept those in remission from cancer.  

It is also still worth considering taking out critical illness cover, mainly because there is still the potential for being diagnosed with another illness. Having already experienced the effects something such as cancer can have on your life, it makes sense you may want added protection in place in the case any other illnesses are diagnosed at a later point. 

If you’re not sure about what policies may be available for you, check out our page on cancer life insurance or speak to one of our highly experienced advisers for more advice. We are the UK’s #1 experts in cancer life insurance and able to answer any questions you may have.  

Common misconceptions about critical illness cover  

When speaking about disadvantages of critical illness cover, we also need to be aware there are plenty of common misconceptions related to this type of policy. Here, we can help you see the plain, honest facts about what critical illness cover is compared to any things you may have heard previously. We will outline some of these ideas and why usually they are incorrect:  

  • I am not going to get ill enough to need to make a critical illness claim. 

Hopefully this one is correct. Ideally you don’t want to need to claim for critical illness, but it is worth having cover in place to protect yourself in the instance that you cannot work and end up needing the financial support. If you become ill, you are more likely to be able to claim than you think, depending on the specific policy.  

  • A critical illness policy is only designed for terminal illness 

This isn’t true. Critical illness and terminal illness are not one and the same. You can be classed as having a critical illness without being terminally ill. In fact you cannot take out a critical illness policy if you have been diagnosed as terminally ill, though you can claim on an existing critical illness policy if you already have one in place. 

  • 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 on top of this. Trust us, there are benefits to having both policies in place – the main one being the added protection for yourself and your family. Some life insurance policies may include critical illness cover as a benefit but not all do so it is worth checking with individual providers. 

  • If I don’t have a mortgage, then I don’t need critical illness cover  

We understand where this myth has come from. Critical illness cover was originally designed as a way to ensure you could continue to make mortgage payments or even pay your mortgage off, if you became seriously unwell and was this was sold alongside mortgages. Even if you rent, you can still take out critical illness cover and benefit from all of its advantages. You do not need to be a home owner to take out critical illness cover. 

  • Critical illness cover is too expensive for me  

All insurance policies will vary in price depending on a number of factors such as the age and medical history of the applicant. The pricing can also vary depending on the individual insurance provider. We can assure you critical illness cover is not as expensive as you may imagine, and you will be able to find a policy to suit you without paying hugely inflated prices. 

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

Most critical illness claims in the UK are accepted. In fact, on average 91.3% of claims will be paid out. So yes, this does leave a slim chance that you may not receive a pay out but overall, the odds of your claim being accepted are very good.

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. 

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

You definitely will still be able to get critical illness cover if you have pre-existing medical conditions. It will just most likely be the case that the insurance company will place an exclusion on this condition, so you cannot claim for it. You should be able to claim for other subsequent medical conditions you are diagnosed with. 

  • All illnesses are covered by critical illness cover 

This will depend on the insurance provider and the specific policy you are looking at. If you are unsure of what illnesses are covered you can speak to the provider directly, or an independent adviser who will be able to check this for you, so you have all the facts you need to decide on a policy.  

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

Age is a factor that is considered any time someone takes out an insurance policy and can affect the monthly amount you may pay. Though it is true that generally the younger you are the less likely you are to be diagnosed with a serious illness – it isn’t impossible. In fact, with any insurance policy we advise getting cover in place as early in life as you can to make sure you are getting the best possible deal. 

  • I can get sick pay if I need time off work due to illness, so I don’t also need critical illness cover 

In the UK you are entitled to Statutory Sick Pay (SSP) which can be paid by your employer for up to 28 weeks. Whilst this will be helpful to you if you are unable to work due to illness, SSP is only £99.35 a week.  

With mortgage payments/rent, utility bills and a whole host of other expenses, this is most likely not even scratching the surface of the amount you might need to get by. Depending on your employer, you may be able to access slightly more funds, or the company may have a sickness payment scheme in place – but in the long run it will be beneficial to you to have an additional income stream such as the money from a tax-free critical illness claim.  

Should I get critical illness insurance? 

After reading this article, you may still be thinking “is critical illness insurance worth it?” As much as we may like to answer this, the answer to this question is in your hands. Everyone’s circumstances are different. A policy that works for one person may not work for someone else.  

All we can say is we have highlighted for you some of the disadvantages of critical illness cover – but also the fact that normally, the benefits balance out any negatives. The decision is now up to you.  

Make sure to consider your options and choose wisely. Having some form of cover in place can be the difference between yourself and your loved ones struggling or getting by, at a time where you might greatly benefit from the financial support. 

If you are considering taking out critical illness cover or any of the other forms of life insurance mentioned in this article, don’t be shy. Get in touch with one of our expert advisers today, we’re more than happy to help point you in the right direction – setting you up for a great future with the knowledge your family’s well-being is protected. You can get a FREE QUOTE by giving us a call on 0800 009 6559


Below we have linked a few helpful resources for if you would like to learn more about critical illness cover: 

Citizens Advice – Critical Illness Insurance 

Which? – Critical illness insurance explained 

Legal and General – Critical Illness Cover 

Aviva – What is critical illness cover? 

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