insurance
Critical Illness Cover
Critical illness cover can help when you are diagnosed with a serious illness such as cancer, or suffer a heart attack or stroke.
You can buy this cover as a stand alone policy or alongside a life insurance plan. Unlike life cover, it is designed to provide money for you, while you are still alive.
When it comes to safeguarding our financial future, many of us immediately think of life insurance.
While life insurance is undeniably vital, there’s another type of protection that’s equally important but often overlooked: critical illness insurance.
Just as life assurance provides financial security for our loved ones in the event of our passing, critical illness insurance offers a financial safety net if we’re diagnosed with a severe illness. In a world filled with uncertainties, having both life and critical illness cover ensures that you and your family are protected from life’s unexpected challenges.
In this guide, we go into the ins and outs of critical illness insurance and why it’s an essential consideration for anyone looking to secure their financial well-being.
What is Critical Illness Insurance?
Critical illness insurance is a type of protection policy designed to offer financial support if you are diagnosed with a specified illness or medical condition during the policy term.
Unlike life insurance, which provides a payment upon death, critical illness insurance offers a tax-free lump sum payment if you suffer a listed medical problem, but while you are still alive.
This can be invaluable in helping you and your family cope financially during challenging times, allowing you to focus on recovery.
You will find more useful information in our article: “How does critical illness insurance work?“
What does Critical Illness Insurance cover?
Critical illness insurance is designed to provide financial support when faced with life-altering illnesses. The range of conditions covered can differ significantly between insurance providers, but there are several core illnesses that most policies in the UK will cover:
Cancer
While most policies cover cancer, it’s essential to note that some cancers, especially those detected early and are less severe, might not be included.
Heart Attack
The severity and type of heart attack can influence the payout. Some policies might specify the need for certain symptoms or a particular level of heart damage.
Stroke
Strokes that result in permanent symptoms are typically covered. However, minor strokes or transient ischaemic attacks (TIAs) might not be.
Multiple Sclerosis
A diagnosis of multiple sclerosis is generally covered, but insurers might require evidence of specific symptoms.
Organ Transplants
This includes waiting for or undergoing major organ transplant surgeries, such as heart, lung, liver, or kidney transplants.
Coronary Artery Bypass Surgery
This refers to surgeries to correct narrowing or blockage of arteries that supply blood to the heart.
In addition to these core conditions, many policies also cover other severe illnesses, such as Parkinson’s disease, major organ failure, and loss of limbs. Some policies even offer partial payouts for less severe conditions or surgeries, ensuring that policyholders receive some level of support even if they don’t meet the full claim criteria.
It’s vital to understand that the definitions of these illnesses can vary between policies.
For instance, one policy might cover all types of cancer, while another might exclude less advanced cases. Therefore, it’s of utmost importance to read the policy details carefully and, if possible, consult with a financial adviser or insurance specialist. This ensures that you’re fully aware of what’s covered and any potential limitations or exclusions.
Protecting your mortgage
When applying for a mortgage, it’s important to consider what would happen if one of the borrowers died.
Taking out mortgage life insurance will enable the mortgage debt to be fully repaid in the event of your death.
However, what if you fall seriously ill and can’t earn?
A severe illness diagnosis can jeopardise your ability to work and therefore meet your mortgage payments.
The NHS is not without its own problems and issues, but with each passing year, medical treatments do improve and allow us to recover from serious conditions and live for many more years.
Critical illness cover is there to provide some financial support in the early days and months of a diagnosis. This will be a time where you may be unable to work, you could be in hospital for many weeks and you and your family will understandably be very emotional and stressed.
A critical illness cash payout will allow you some breathing space, time where you don’t have to worry about affording the mortgage payments or the council tax.
The different types of policy
There are two main types of critical illness insurance:
With life insurance
Many life insurance policies will allow you to choose critical illness cover as an ‘add on’. You would have this choice when you first apply for life cover.
If selected, the policy will then have two ways for you to claim against it. 1) Upon death, 2) Upon diagnosis of a specific illness or condition.
Once a claim is made, for death or critical illness, the policy will then end.
Stand alone
With this option you are buying just critical illness insurance, which will be it’s own separate policy.
If you still have life cover in place. the combined monthly cost would be slightly more than if you had one policy that covered death and critical illness.
But with this comes 2 advantages: 1) Your critical illness benefit can be at any level you feel is appropriate, not just an amount linked to the life cover. 2) Should you claim for a critical illness, the life assurance policy will remain in place, providing full death cover for the remaining term.
How much cover do you need?
This will be different for each person.
You need to consider what would happen if you couldn’t work for a period of time due to illness.
Pretty much all of your normal monthly expenses will still need to be paid for.
Ideally, having critical illness for the full amount of your mortgage would provide excellent cover. Should something happen, then you have the opportunity to completely repay your mortgage.
We say ‘opportunity‘ because it’s up to you to decide how you spend the money.
Or you could look to cover your annual earnings, providing 12 months worth of income as a lump sum.
Critical illness cover is more expensive than life insurance, so the selected cover also needs to be affordable.
A financial adviser will be able to talk you through the different options and costs.
You might want to consider critical illness cover if:
- You don’t have enough savings to fall back on if you’re unable to work
- Your employer doesn’t offer long-term illness benefits
- You are self-employed
- State benefits won’t be enough to cover your outgoings
How much does it cost?
The cost of critical illness insurance in the UK varies based on several factors.
Age plays a major role, with premiums generally being lower for younger individuals. Your health status, including any pre-existing conditions or hereditary conditions, might increase the premium.
Lifestyle choices, such as being a smoker or having high-risk habits, can also impact the cost. The amount of coverage you choose will influence the premium, with higher coverage amounts resulting in higher premiums.
Additionally, the type of policy you select, whether comprehensive or standard, can affect the cost. It’s advisable to shop around and compare quotes from different providers to ensure you get the best deal suited to your needs.
What doesn’t critical illness cover?
Critical illness insurance provides coverage for a range of serious illnesses, but it’s important to note that not all conditions are covered. Here’s a summary of what critical illness insurance typically does not cover:
- Pre-existing Medical Conditions: If you have a pre-existing medical condition at the time of taking out the policy, it’s likely that any claim related to that specific condition will be excluded.
- Certain Types of Cancer: While many types of cancer are covered, some less severe forms might not be. For instance, some policies might not cover early-stage cancers or non-invasive cancers.
- Health Conditions Not Listed: Only the specific illnesses listed in the policy are covered. If you’re diagnosed with a condition that isn’t on the list, you won’t be able to claim.
- Survival Period: Some policies have a survival period, which means you need to survive a certain number of days after being diagnosed before the policy will pay out.
- Drug or Alcohol Abuse: Illnesses or injuries resulting from drug or alcohol abuse are typically not covered.
- Self-inflicted Injuries: Injuries or illnesses that are self-inflicted might not be covered.
- War and Civil Commotion: Some policies exclude coverage for injuries or illnesses resulting from war, riot, or similar events.
- Engaging in Risky Activities: If the illness or injury is a result of engaging in certain risky activities or sports, it might not be covered.
- Age Limit: Some policies might not pay out if you’re diagnosed after a certain age.
- Non-disclosure: If you fail to disclose relevant health information when taking out the policy, a claim might be denied.
Frequently asked questions
No. Some policies tend not to cover early-stage or less aggressive forms of cancer.
It depends on the insurer and the condition. Some pre-existing conditions might lead to higher premiums or exclusions related to that condition.
It depends on the type of policy. Some have a decreasing sum assured where the payout reduces over time, typically in line with a repayment mortgage. Others offer a level term where the payout remains the same.
No. Cover is available with or without a mortgage.
Most people who apply for critical illness insurance won’t need to have a medical. The insurer will decide this after first looking at your application form and medical history.
Not necessarily. For conditions such as cancer and heart attack, the diagnosis that you have it is enough to claim. Most policies have a permanent disablement section, which can be linked to working.
