Skip navigation

Confused.com’s Guide to Critical Illness Insurance

A doctor and a patientWhen planning your family’s financial future, it’s important to consider all the possible eventualities you may have to face.

Comparing life insurance and investing in a policy can ensure your loved ones are provided for in the event of your death.

But it’s also worth considering what might happen should you be diagnosed with a serious illness.

What is critical illness insurance?

Critical illness insurance provides a tax-free lump sum if you are diagnosed with an illness specified under the policy.

The payout can provide security through a time of potential financial and emotional stress, for example, if you have to finish work as the result of your health.

What is a critical illness?

The definition of a critical illness will vary from policy to policy, so it’s important to check when buying cover.

Policies commonly cover illnesses such as cancer, heart attacks, strokes, major organ transplant and Alzheimer’s disease, but a careful study of the policy will determine what is actually covered.

Alongside this, a policy may include optional additional illnesses which may be considered critical enough for a payout.

Who needs critical illness cover?

Different people will need critical illness cover for different reasons.

A single person might want to buy a policy to ensure their mortgage is paid.

But a person with children may want to ensure their family is provided for if they can’t work due to ill health.

A critical illness payout may also prove useful if you need to make changes to your property or need to move home because of ill health.

Why is Life Insurance with Critical  Illness Cover so much more expensive than Life Insurance?

Critical Illness cover gives you or your loved ones money if you become terminally ill or are diagnosed with a critical illness. If this doesn’t happen, the policy will also pay out in the event of death. 

Critical Illness cover premiums are more expensive than life only insurance premiums due to the simple fact that it is more likely that you will make a claim on a Critical Illness policy than on a Life Insurance only policy.

Surviving a serious illness such as cancer or stroke is thankfully becoming more common, but often brings additional financial pressures. There is where Critical Illness cover can really help, allowing you to take additional time off work to fully recuperate, pay private medical bills or make changes to your home.

What do I need to consider when buying critical illness cover?

  • Length of cover – you can decide how long a policy can last, for example, until your children have grown up, until the mortgage is paid off or for life.
  • The level of payout – you can choose the tax-free amount to be paid, with higher premiums payable for higher amounts.
  • What illnesses are covered – each insurer will only pay out on illnesses defined in their policy and no others. Policies typically include exclusions for HIV/Aids, self-inflicted harm and drug abuse.

What does my insurer need to know about my health?

You will be required by your policy provider to be honest about your medical history.

A claim could be invalidated if your insurer finds out health details which you failed to mention when applying for cover.

Most policies also carry an initial exclusion period during which you’ll be unable to claim. A typical exclusion period is three months.

What else do I need to know?

  • If you have children, some policies will include cover if your son or daughter becomes critically ill.
  • It is possible to fix premiums. Alternatively, premium levels may be reviewed after an agreed period.
  • Critical illness contrasts with payment protection insurance, which pays out a monthly amount if you become ill, rather than a lump sum.
  • Policies have a cooling off period of at least 14 days.