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Is Critical illness insurance worth it?

Although we know we will all pass away one day, most of us don’t think about what will happen if we become critically ill. Either we don’t like to think about it or we think it’s something that will happen to other people, not to us. However, it is something that can happen to anyone and the consequences can be devastating. Not only the illness itself but also how we pay the bills or care for our families.

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Critical illness cover is an extra form of protection that pays out a tax-free lump sum if you are diagnosed with an illness or serious medical condition. This is not the same as regular life insurance, which is designed to pay out money when you die. You can take out the cover as well as your life insurance or instead of it.

There is also the option of children’s critical illness cover, which is not a stand-alone product but an add-on to your insurance. The reason for this is that you would be making the claim on behalf of your child.

Who needs critical illness cover?

A critical illness can happen to anyone, but is it worth having critical illness cover? No matter what your age is, what lifestyle you have, or your family medical history; everyone is at some risk of being affected by a severe illness.

How does it work?

If you are diagnosed with an illness or serious medical condition that is listed in the policy, you will get a tax-free lump sum. Unlike regular life insurance, this money will come directly to you. This is not the same as terminal illness cover, which is often included in basic life insurance and refers to illnesses where you are diagnosed to pass away within 12 months.

The money can be used towards anything you wish. Many people use it for their mortgage, rent, living expenses or household bills. It is there to ease the financial burden that can come from a devastating event, so it’s easy to see how critical illness cover can give you peace of mind.

Each insurance company that offers critical illness cover will have a list of medical conditions which will qualify you for a payout if you get diagnosed with any of them. The list of conditions varies from insurer to insurer, but all of them will cover you for a wide range of illnesses and many also cover permanent disabilities as well.

Which type of critical illness cover should I get?

There are two main types of critical illness cover:

  • Combined critical illness cover– This type of insurance will pay out a lump sum only once. If you are diagnosed with a critical illness within the term, you will get a pay-out. This means you will no longer be covered and if you die later on within the term, your beneficiaries won’t receive anything.
  • Additional critical illness cover – This is a more expensive type of critical illness cover. As with the previous cover, you will get a pay-out if you are diagnosed with a critical illness or disability. However, the insurer will also pay out a lump sum if you die within the term as well.

This varies between insurers but first, we need to define what we mean by: “critical illness.” Insurers generally define this as an illness that causes long-term and serious damage. Exactly what illness is covered will depend on the policy and it is important to read through it carefully before you buy so you know exactly what you are covered for.

Common examples of illnesses covered include:

Whether you get a pay-out also depends on how severe or permanent the condition is, even if it is one that appears in the policy. A mild heart attack or stroke may be excluded if it isn’t severe enough to qualify, for example. This is the same for some forms of cancer if they are known to be easily treatable.

How much does critical illness cover cost?

There isn’t an average cost for critical illness cover as the amount you pay will depend on a number of factors, such as; your age, your medical history, and your lifestyle. The price, as with most life insurance, will increase the older you get so it is a good idea to start looking early, even if you think you are at low risk of contracting a critical illness.

You might want to think about quitting smoking or making healthier life choices at least 12 months before making your application. This has a good chance of making your premiums (the money you pay) more affordable.

In addition, any pre existing medical conditions may mean paying a higher premium, or an exclusion being applied to your policy for anything related.

It is important to pick a plan you can afford as if you stop paying premiums before the term ends, you will not be covered and you will not receive any money back. The term will simply come to an end.



Safe Workers – Average sick days in the UK 2022 

Statista – Sickness absence rate in the UK 1995-2021 

Citizen’s Advice – Check if you can get sick pay 

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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.

We are dedicated to providing the best outcomes that we can and access to the best insurance solutions in the way that our customers want or need. We understand that everyone is totally unique in how they want things done and their own individual circumstances, which is where our totally unique approach to financial protection is driven from.

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With nearly three decades of expertise and established with a commitment to excellence in everything that we do. We have been a trusted partner for thousands of families, individuals and businesses, all with one common goal of looking for the best protection solutions.

Our Mission: To provide easy access to fair pricing, affordable protection and the very best financial security to families and individuals. We are dedicated to offering comprehensive insurance solutions that safeguard the well-being of our policyholders. Guided by integrity, transparency, and a commitment to excellence, we strive to empower consumers and families to face the future with confidence. Our mission is not just about policies; it's about protecting dreams, ensuring legacies, and being a trusted partner on life's journey.

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