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Is critical illness insurance worth it?

No matter your age or situation, everyone is potentially at risk of developing a serious or ‘critical’ illness at some point in their life. Most of us don’t take the time to consider what would happen to us if we became critically ill, as it is a difficult topic to think about but something that is worth preparing for.

This is exactly why policies like critical illness insurance exist, to help provide financial security if this happens to you and make things a little easier for you and your loved ones. Critical illness insurance (or critical illness cover) will pay out a cash lump sum to help you cover key expenses and costs while you recover from or adapt to living with your medical condition.

Not everyone will be familiar with how critical illness insurance works, so our experts have written this quick and simple guide to make things clearer for you.

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60-Second Summary – Is critical illness insurance worth it?

Here, we’re looking at how critical illness insurance works, how it can help you financially, and if it is generally worth having for most UK households.

  • Critical illness insurance will pay out a cash lump sum on diagnosis of a serious illness that is covered by your policy. This money can help with covering the cost of important bills like mortgage or rent payments or be used to help with medical expenses.
  • Every UK insurer will cover a different number of medical conditions within their policies. You should read the terms and conditions of your policy carefully to understand exactly what you can and can’t claim for.
  • Critical illness insurance is one of several insurance policies that can help you financially if you become seriously ill or injured. Alternative policies that can be useful include income protection insurance, personal accident insurance and health insurance.
  • If you need some help to figure out if critical illness insurance is worth it for you, you can get free and friendly guidance from a critical illness insurance expert.

Many UK families think it is worthwhile to have critical illness insurance as a safety net for extra financial protection. Being diagnosed with a serious medical condition can have a big impact financially and the payout from a critical illness policy can make a massive difference.

Critical illness insurance can be a lifeline for families who don’t have any savings or other resources to rely on if someone became seriously unwell and couldn’t work.

Critical illness cover can help with important bills and expenses like:

  • Mortgage payments
  • Rent payments
  • Utility bills
  • Finance arrangements (e.g. car finance)
  • Cost of private medical care
  • Medication costs
  • Adjustments to your home
  • General cost of living

You should carefully consider what might happen financially if your health means that you need time off work. Your partner or other family members may also need some time off to help with your recovery, which is something that people don’t always think about.

A critical illness insurance payout allows you to rest easily knowing that your most important outgoing expenses will be covered.

Insurance companies define a critical illness as an illness or condition that causes long term and serious damage to your health.

Every insurer will have a set list of critical illnesses that their policies will pay out for, so it’s important to read through your policy documents carefully to know what you are covered for.

Common examples of illnesses covered include:

Though the conditions covered can vary, most insurers will cover 36 main medical conditions including the most common reasons for critical illness claims which are cancer, heart attack and stroke.

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 types of cancer if they are known to be easily treatable.

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Not everyone will want to buy critical illness cover or feel that it is worth it for them which is understandable. Everyone’s situation is different and you should think about whether critical illness cover is affordable for you and whether you have anything else in place that could support you if you were seriously unwell.

  • Income protection insuranceIncome protection insurance is another type of policy that is often confused for critical illness cover. It works differently though, by paying you a monthly income to replace your regular salary if you are unable to work due to illness or injury. Some people decide to buy both policies, but if you already have income protection you might decide this is enough cover for you.
  • Savings accounts or investments – If you have significant savings, you may think this will be enough to help you financially if you are diagnosed with a serious condition. However, critical illness cover can pay out huge amounts of money (£25,000, £50,000 etc) when you need the support and can work as a cost-effective alternative to traditional investments that won’t decrease in value.
  • Affordability – Critical illness cover is often much more affordable than you might think, with the average cost being around £25.16 per month. There are also easy ways to lower the cost of your policy like slightly reducing your cover amount or policy term.

More information – Do you need critical illness cover?

What are the disadvantages of critical illness insurance?

Critical illness cover is an incredibly useful policy to have to protect yourself financially if you develop a serious medical condition. You will receive a cash lump sum if you are diagnosed with a critical illness that is covered by your policy.

There are few things to be aware of though that could be considered a disadvantage of this type of cover:

  • Some policies will cover more medical conditions that others, so it’s important to do some research to ensure you are happy with the level of cover your policy offers
  • You won’t be able to claim for any medical condition(s) you had before buying your policy
  • You will usually only be able to claim on your policy once (if you can claim more than once this will be explained in your policy documents)
  • You won’t be able to claim multiple times for the same medical condition
  • You won’t be able to claim for any medical conditions that aren’t covered in your policy terms and conditions
  • Your condition will need to exactly meet the definitions set out in your policy documents for your claim to be valid

More information – The disadvantages of critical illness insurance

It is usually cheaper and easier to buy critical illness cover earlier in life, as we are all more likely to develop serious illnesses as we get older.

Generally, any type of life insurance product (e.g. critical illness, income protection) will be less expensive the younger you are when you buy it.

This isn’t to say that you can’t buy critical illness cover later in life, just that it can be even more important to do some research to get the best price. The best approach would be to compare quotes from multiple providers, to see who is offering the right level of cover at the price that is most affordable for you.

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Critical illness insurance is a type of life insurance product but is very different to life insurance itself.

Life insurance is designed to pay out a cash lump sum in the event of your death to your family (or chosen beneficiaries). This money can be used to help with big expenses like funeral bills and repaying your mortgage.

There are also several different types of life insurance available including:

Critical illness insurance will pay out a cash lump sum if you are diagnosed with a serious medical condition that is covered by your policy.

Critical illness cover is often sold as an add on to life insurance, though it is possible to buy it as a separate policy with some insurers.

Which is better life insurance or critical illness?

Life insurance and critical illness cover are very different policies, so one isn’t necessarily better than the other. It’s just about what you would like to protect yourself against, as life insurance pays out when you die and critical illness pays out on diagnosis of a serious medical condition.

If you are more worried about what would happen if you got seriously ill, critical illness insurance would be the better option for you. If you are concerned about how your family would cope financially in the event of your death, life insurance will pay out a cash lump sum to support them (often hundreds of thousands of £s).

It’s also possible to buy life insurance alongside or combined with critical illness, which is a popular choice as it provides a higher level of protection.

Whether you choose to buy life insurance or critical illness insurance is entirely up to you. There are pros and cons to both types of cover that should be considered before buying either policy, so you are certain you are choosing the right type of cover.

Pros and cons of life insurance

Pro

  • Pays out a cash lump sum in the event of your death
  • Peace of mind that your loved ones won’t struggle financially when you are no longer around
  • Often includes extra benefits like gym discounts or online GP services
  • Flexible policies so you can choose the level of cover that suits you best
  • Wide range of policy types to choose from
  • Can often protect yourself and your partner with joint cover

Con

  • Can be hard to understand your best options for cover without the help of an expert
  • Will need to review your policy from time to time to ensure it still offers the right level of cover
  • Cover can be more expensive for people with medical conditions or dangerous occupations/hobbies
  • Certain types of policy will be more expensive than others

Pros and cons of critical illness insurance

Pro

  • Critical illness pay outs are tax free, so you have access to the whole lump sum
  • Different policy options available to suit different budgets
  • Can add your children or partner for extra protection (usually for an extra cost)
  • Can often be bought as an add on to your life insurance policy
  • Options for standard or enhanced cover gives you flexibility to choose the right level of cover for your own situation
  • Can be used to cover the cost of important bills like mortgage or rent payments or the cost of private medical treatments

Con

  • Number of conditions covered will vary between insurers
  • Any condition you claim for will need to meet the exact definition set out in your policy documents
  • You can’t claim for any pre-existing medical conditions
  • You will usually only be able to claim on your policy once
  • It can be hard to compare critical illness policies, so it can be useful to speak to an expert for advice

Note: These policies are also designed for different purposes, so you should carefully consider what you need from your cover. Life insurance pays out in the event of your death, whereas critical illness cover pays out on diagnosis of a serious medical condition.

You can choose to have both policies if you would like extra protection for your family, or simply pick the one that feels right for you. If you’re not too sure what your best option is, you can speak to an insurance specialist for expert guidance and advice.

What is critical illness cover?

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 depending on what feels right to you.

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 if they are diagnosed with a serious illness.

These policies act as a safety net and can provide much needed financial support while you and your family adjust to an unexpected diagnosis.


How does critical illness cover work?

If you are diagnosed with an illness or serious medical condition that is listed in the policy, you will be paid a tax-free lump sum. Unlike regular life insurance, this money will come directly to you once your claim is approved.

Every insurer covers a different number of medical conditions and what you are covered for will be outlined within your policy documents. It’s a good idea to read these documents carefully, so you know exactly when you are entitled to claim.

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 strain that can come with a serious medical condition, so it’s easy to see how critical illness cover can give you peace of mind.

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.


How much does critical illness cover cost?

We’ve recently done some research and found that the average cost of critical illness cover in the UK is £25.16 per month. However, as this is an average cost not everyone will pay this price.

You may end up paying more (or less) based on standard factors like:

  • Smoker status
  • Medical history
  • Amount of cover needed (£s)
  • Term of policy (number of years)

You should think carefully about what you need from your critical illness policy and how much you can realistically afford before you apply. It can be helpful to talk to a critical illness insurance expert if you’re finding it difficult to find a reasonable price for cover.

More information – Average Cost of Critical Illness Cover UK


Which type of critical illness cover should I get?

There are two main types of critical illness cover available in the UK:

  • Standard – Typically, these policies provide coverage for anywhere between 40 to 76 critical illnesses (thought the exact number of conditions covered will vary).
  • Enhanced – Theses policies will cover a higher number of medical conditions – some will cover more than 180 medical conditions! These policies will cost more than standard policies because the level of cover is much higher.

You should choose the type of critical illness cover that works best for your own situation and how much cover you need. If you’re not sure about which is your best option, you can get some free guidance from one of our critical illness cover experts.

The easiest way to find the right critical illness insurance policy is by speaking to a critical illness insurance expert.

An experienced insurance advisor will be able to help you quickly assess what level of cover you need and which policies best match this – and at the lowest possible prices!

It can be harder in some situations to find cover that is reasonably priced and we’re proud to be experts in critical illness cover for people with:

If you need help with finding the perfect critical illness cover to protect you and your family, you can call 0800 009 6559 or click here for FREE and friendly guidance.

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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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