Critical illness cover
What does it cover and is it worth it?
Critical illness cover is a common add-on to life insurance, though you can get standalone policies. It's designed to pay out a lump sum if you get a serious illness or injury – but there are many exclusions. This guide explains how insurers define 'critical', what to watch out for and how to decide if it's right for you.
A quick overview of critical illness insurance...
If you're worried that getting a serious illness or injury might impact you or your loved ones financially, critical illness insurance could be an option. Understanding the basics and buying it the right way could save you £1,000s over the life of your policy and help you avoid being ripped off.
Critical illness cover is a common add-on to life insurance, though you can get standalone policies.
Critical illness insurance pays you a tax-free lump sum if you get a serious illness or injury. Though there are many exclusions so carefully check what's covered and exclusions before you take out a policy.
Most policies only pay out once, at which point the cover ends. This also usually applies to joint policies—while both people are covered, typically only one claim can be made before the policy ends.
How much cover? Use your current monthly outgoings and add a buffer for extra medical-related costs. Multiply this by the number of months you'd ideally like any payments to last.
Know what cover you need? Use an execution-only discount broker. It's usually the cheapest way and can save you £1,000s over the life of your policy.
Not sure what cover you need or have a pre-existing medical condition? Use an advisory broker. You'll pay a little more, but you'll get personalised regulated advice to help you choose the right policy.
Already got a policy & quit smoking over a year ago? It could be worth getting a new quote if you've been nicotine-free (including vaping) for at least a year, if your circumstances have changed such as no longer having a risky job, or if you originally went via a bank or insurer and so are paying a lot. Savings could be large.
What is critical illness cover?
In a nutshell, critical illness cover pays out a lump sum if you're diagnosed with one of the 'critical illnesses' your policy covers. Most will typically cover life-threatening conditions such as a heart attack, stroke and cancer.
Many critical illness policies are tied in with life insurance, but it's possible to get standalone cover.
How does critical illness cover work?
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You choose how much you'd want the policy to pay out, and how long you'd like the cover to last. For example, you could choose to only keep cover until your mortgage is paid off, orkeep it until the policy's maximum age limit (at which point the cover automatically ends) – which is typically between 65 and 75.
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It's important you declare any pre-existing medical conditions, as failing to do so could invalidate a future claim. You'll usually complete a health questionnaire when you apply and the insurer may ask to access your medical records.
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The insurer will work out your monthly premium based on the info you provide – the riskier you appear (for example, if you have a family history of serious illness), the higher the cost.
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If you're later diagnosed with a condition covered by the policy, it'll pay you a tax-free lump sum. You can spend the money however you like, whether that's paying off your mortgage, replacing lost income, covering day-to-day expenses or medical costs.
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Most policies only pay out once, at which point the cover ends. This also usually applies to joint policies—while both people are covered, typically only one claim can be made before the policy ends.
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This type of policy won't pay out if you die without making a claim—that's what life insurance is for. Critical illness cover is also different from terminal illness cover, which is often included with life insurance.
What conditions are (and aren't) covered?
The definition of 'critical illness' can be a minefield and varies between insurers. Some illnesses might not be covered at all and, even if your policy does include, say, certain cancers, it may only be specific stages that are covered. It’s important to read the T&Cs carefully before taking out any policy if you want peace of mind.
Some policies also offer smaller additional or partial payments for certain less severe conditions, such as some early-stage cancers, without ending the policy, and will still pay out a further lump-sum for a defined critical illness.
Common inclusions on critical illness policies:
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Certain types and stages of cancer
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Heart attack
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Stroke
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Alzheimer’s disease
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Parkinson's disease
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Loss of a limb
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Deafness
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Blindness
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Multiple sclerosis
Common exclusions to watch out for
There are often stipulations where a policy won't pay out at all. This can include the severity of illnesses you need to be diagnosed with – for example, you might have to have permanent symptoms to be allowed to claim on the policy.
The insurer could also withdraw cover for some conditions after you reach a certain age, or if you were aware of symptoms before taking out the policy.
In addition, most policies will also exclude claims where the illness is a result of self-harm, alcohol and/or drug abuse, or from taking part in risky or extreme sports. There are also usually time limits in place too, such as not being able to claim in the first 90 days of the policy or the claim being rejected if you were to die within a month of being diagnosed with a critical illness. Terminal illnesses are also not usually covered.
How to decide if you should get critical illness cover
Whether it's worth it depends on your circumstances. Before buying a policy, consider the following:
Check if you're already covered. Your employer may provide critical illness cover as a workplace benefit, or let you buy it through a company benefits scheme. Also check whether you, your spouse or civil partner already have life insurance that includes critical illness cover.
Don't rely on workplace cover alone. If you leave your job or are made redundant, you'll usually lose the cover and can't transfer it. If your health has worsened by then, taking out a new policy could be more expensive.
Think about whether you'd cope without it. If you have enough savings, a partner who could support the household financially, or you don't rely on an income from work, you may decide you don't need cover. You may also qualify for state benefits if you're unable to work, though these are often much lower than your usual income.
Consider income protection instead. Income protection insurance pays a proportion of your salary (typically around 60%) for a set period of time (anything from 12 months to retirement age) if illness or disability stops you working, often covering a wider range of conditions than critical illness cover. It's usually more expensive, but may offer better long-term protection. If you're unsure which is right for you, consider speaking to a regulated financial adviser.
How much cover do I need?
This will largely be determined by your personal circumstances – as well as a monthly payment you can realistically afford.
A good starting point is to calculate any current monthly outgoings that you'd need to cover, then add a buffer for any extra costs that might crop up relating to a critical illness – for example, travel to and from a treatment centre, medication costs or higher utility bills to run medical equipment.
This should then give you a ballpark figure to work from, which you can then multiply by the number of months you'd ideally like any payments to last to work out a lump sum amount. As an example:
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Amount needed for monthly outgoings - £2,000
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Number of months you need it to cover - 120 (10 years)
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Total amount of critical illness cover needed - £240,000
How to buy critical illness cover as cheaply as possible
The worst way to get level-term insurance is by going straight to a bank or insurer, here you pay full price and don't check whether it's the cheapest on the market. Many people use regular comparison sites, which scour the market to find you the cheapest deal, but they don't offer any advice yet still take a huge whack of commission.
Instead, you can slash costs by using specialist brokers. Two types:
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The very cheapest route is via an execution-only non-advised discount broker – but ONLY if you know what you're doing. With a top execution-only discount broker you pay a small fee, say £25, it shows you the cheapest providers and rebates all the commission it receives, this is often £1,000s over the life of a policy. In practice this just means you pay far less each month. Yet it is totally 'unadvised' meaning you get no help and need to know what you're doing.
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Unsure, want help, have a medical condition or complex circumstances? Use an advisory broker. A good advisory broker will find you the cheapest policy and give personalised regulated advice (often over the phone) to help you choose what's right for you. Yet it will keep the commission (that's how they're paid). If you have an independent financial adviser, it should be able to help too.
Before you apply – crucial need-to-knows
The more cover you get and the longer the term, the more it'll cost. But old age, poor health, being a smoker, and even having a risky job will all increase how much you'll pay, too...
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Declare ALL pre-existing physical and mental health medical conditions or it could invalidate the policy. If you've needed medical treatment, assistance or medication in the past, for physical or mental health conditions, it could be considered a pre-existing condition, for example, high blood pressure.
Check how far the insurer asks you to go back, and be honest, or it could nullify the policy or reduce the pay-out (though for some, sadly, pre-existing conditions can make it very costly, which is why we suggest you get advice (use an advisory broker in that case). More in our Life insurance with a pre-existing condition help. -
Choosing Guaranteed premiums is usually cheapest. A premium is just the amount you pay each month for an insurance policy. When buying critical illness insurance, you can usually choose either Guaranteed premiums (the amount you pay each month stays the same for the whole policy) or Reviewable premiums (often cheaper at first but the insurer can hike the price later – this is more common if you link the insurance with life insurance (a more complex policy choice).
Cheapest execution-only brokers – if you know what you want
These are by far the cheapest option, but you need to know what cover you want. Below are the brokers we've found to be the cheapest, and have decent feedback. All charge a one-off £25 broker fee. They've been our top picks for over a decade – the prices tend to be similar, but its worth checking a couple
If you call any of these companies before you buy make sure you're clear on whether you're getting 'advice' or 'information'. If they're advising you, or pushing you towards one policy over another, they need to do a full check on your financial and medical circumstances and insurance needs, so it'll cost more. Do ask if you're not sure.
If they call you to verify any details, tell them you want 'non-advisory', or it could get pricier.
Cheapest advisory brokers – if you need help choosing
Advisory brokers ask in-depth medical questions, and look into your finances to gauge your commitments. When we researched these brokers, one wasn't consistently cheaper than others, it depends on the circumstances, so try a couple if you've time.
To find a critical illness insurance adviser, we have listed some brokers who offer vouchers or cashback when you purchase critical illness cover alongside a life insurance policy. And while you should factor these in to your calculations, you shouldn't be swayed by them. For example, if a broker with a voucher gave you a premium just £1 a month more expensive than the same policy with another provider, over a 25-year term, that'd mean you were paying £300 more for the policy – not worth it for a £100 voucher.
With all three, to get the incentive, ADVICE IS BY PHONE...
Up to £410 Amazon voucher. New ActiveQuote* life insurance customers who use this link to request a callback and take out a policy will get a voucher after six monthly payments have been made. For monthly premiums under £10, you'll be emailed a £35 voucher, monthly cost up to £29.99, you'll be emailed a £100 voucher, and more increments rising to £410 for monthly premiums over £90. | |
£90 cashback. Request advice and buy a policy via this Howden Life & Health* link to get £90 cashback. It will be paid after you've made the first six monthly payments. | |
Up to £140 Amazon voucher. To get the voucher, answer some initial questions using this LifeSearch* link and you will get a callback. Once you commit to buy a new policy, if your monthly premium is up to £30, the voucher amount will be £60 and if your monthly premium is more than £30, you'll get a £140 voucher after you've paid the first six monthly premium payments |
Struggling to find cover?
If any of the the listed brokers are unable to provide the cover you are looking for, more options are available by heading to the British Insurance Brokers Association website and use their 'Find insurance' search. Make sure to select ‘Critical illness insurance' when it asks what you'd like to insure.
Other types of life insurance
There are several other types of cover that may be more suitable, depending on your situation:
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Level-term life insurance. It pays out a fixed amount if you die within a set time. We've full info in our Life insurance guide.
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Mortgage-term life insurance (decreasing-term). The pay-out reduces over time in line with your mortgage debt, and ends once it's fully repaid. It’s usually cheaper than level-term life insurance. Read more in our Mortgage life insurance guide.
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Family income benefit. After you die, the policy pays out a tax-free monthly income for the remainder of the term, rather than a fixed lump sum. It's complex, so consult a Financial adviser.
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Over-50s' life insurance. Frankly, we think most people should avoid this. It's an expensive policy that might cost you more than it ever pays out. See our Beware over 50's life insurance guide.
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Whole-of-life insurance. Usually to cover Inheritance Tax. It runs until you die, but is usually expensive and poor value for families who just need cover while they have dependants.
Critical Illness FAQs
Can I get cover for pre-existing conditions?
It's very unlikely you'd be covered for health problems you knew you had before you took out the insurance. All previous medical complaints or doctors' recommendations (including visits) must be disclosed, even if they seem unrelated. If you don't accurately share your medical history, the insurer will argue that had they known of the prior conditions, they may not have offered cover. The result is usually a rejection on the grounds of "non-disclosure".
If a policy does cover existing medical conditions, this could make it cost more, and there may also be extra conditions attached to the policy. Your insurer should make this clear to you before you buy it.
How many critical illnesses can I claim for?
This does depend on the insurer, and the type of policy, you choose. Insurers will generally cover between 20 and 60 critical illnesses in their policies, and let you claim once, after which the policy will end.
The payout amount can also vary as some insurers may make a smaller payment, for example, whichever is the lower of 25% of your total cover or £25,000.
This usually applies if you get diagnosed with specified less severe illnesses. In these cases, you’d expect to get the payout and the policy to remain active.
Can I change the level of cover I have during the policy term?
Some insurers will let you increase the level of cover you have during the term, for an additional cost. It’s worth checking the terms and conditions when applying so you know if your insurer will let you do this, and if an exclusion period will apply before you get the new level of cover.
Can I get critical illness cover for my children?
Many critical illness policies do include some cover for your children – typically paying out if your child is diagnosed with a critical illness it covers or they spend over a certain amount of time in hospital.
If you make any claims for your child on your policy, it’ll generally stay active and you would be able to claim again if you were then diagnosed with a critical illness.
The amount of money you’ll get if your child becomes ill will generally be lower than your total cover, typically a proportion or set value. For example, 25% of the amount you're insured for or a flat £25,000.
How does it work when critical illness cover is combined with life insurance?
Many critical illness policies are taken out in combination with life insurance.
This can work in a couple of ways, either as ‘combined’ or ‘additional’ cover. They work differently in terms of how they pay out:
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Combined cover will only pay out once, either if you’re diagnosed with a critical illness or if you die. This means that if you’re unlucky enough to get a critical illness that pays out and then you pass away after that, the policy would only pay out once.
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Additional cover will pay out both if you’re diagnosed with a critical illness and if you die while the policy is still active. Because it has the potential to pay out more than once, these policies tend to be more expensive than combined cover.
How do I complain about my insurance provider?
The insurance industry doesn't always have the best reputation for customer service. Plus, while a provider may be good for some, it can be hell for others. Common problems include claims either not being paid out on time or at all, unfair charges, or exclusions being hidden in small print.
But life insurance and the advice is regulated, so you can complain to the Ombudsman if treated unfairly. This is Financial Conduct Authority-regulated so if you get wrong advice from an advisory broker, or a claim is unfairly rejected, you have recourse through the Financial Ombudsman.
Yet if you use an execution-only brokers, as the name suggests, it's execution only they are just processing your request, so you generally don't have recourse there (unless they process it wrong).
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