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Critical illness cover

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What is critical illness cover?

Critical illness cover is a type of insurance that pays out a lump sum if you’re diagnosed with a critical illness or life-changing injury.

It's usually offered as an optional extra when you buy life insurance, and is designed to help you cope with the financial effects of a long term injury or illness.

People who receive critical illness payouts typically use them to:

  • Financially support their family if they’re unable to work
  • Pay off a mortgage
  • make adaptations to their home if they’re disabled
  • Pay for private healthcare if they don;t have private medical insurance

How does critical illness cover work?

If you’re diagnosed with a critical illness during the term of your policy, critical illness cover can give you a lump sum payment while you’re still alive. Critical illness cover is an optional extra with most life insurance policies, so you’ll need to pay more each month to be covered.

Critical illness cover shouldn’t be confused with terminal illness cover. Terminal illness cover is often included with life insurance as standard and it can pay out if you’re diagnosed with a terminal illness and have a life expectancy of less than 12 months. Critical illness insurance, on the other hand, will cover serious illnesses like cancer, provided they are non-terminal.

Insurers will set a minimum and maximum term for critical illness cover – they typically range from 5 to 50 years. Critical illness cover also tends to have an age cap for when the cover must end – this could be 75 years old, for example.

Depending on the insurer, you can choose from level, index-linked or decreasing critical illness cover:

Level cover means you’ll pay the same amount throughout the policy and your amount of critical illness cover will remain the same.

Index-linked cover means your critical illness insurance amount will be linked to inflation. This protects your critical illness pay-out, but also means your monthly payments could get more expensive over time.

Decreasing critical illness cover is a popular option for those looking to cover their mortgage payments. As the amount owed on your mortgage decreases over time, your monthly payments decrease over time as well.

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What types of critical illness cover are there?

There are 2 main types of critical illness cover to choose from:

Combined cover merges your life insurance and critical illness cover into a single policy. This policy pays out once, either when you make a critical illness claim, or when your family make a life insurance claim after you die.

If you make a critical illness claim, the whole policy ends, so your family won’t get another pay-out after you die.

Additional cover splits your life and critical illness cover into 2 separate policies. You'll decide how much each policy pays out. If you make a critical illness claim, that part of your policy ends, but the life insurance side continues.

This means, when you die, your loved ones will get a second payout if you die during your life insurance policy’s term.

There are also 3 levels of cover to choose from:

  • Level critical illness cover means you’ll pay the same amount in monthly premiums throughout the policy. You’ll also get the same payout amount no matter when you claim.
     
  • Index-linked critical illness cover links your critical illness insurance amount to inflation. As inflation rises, your payout amount rises too. But it can also mean your monthly payments get more expensive over time.

  • Decreasing critical illness cover is popular for people looking to cover their outstanding mortgage. Your payout amount decreases over time with the amount you owe on your mortgage. So your monthly payments could decrease over time too.

What illnesses are covered by critical illness insurance?

Critical illness is something that severely impacts your quality of life. It could be a stroke or heart attack, or an injury that leaves you with a disability. It could also be a chronic condition like Multiple sclerosis (MS) or Parkinson’s disease. With critical illness insurance, exactly what conditions are covered depends on your insurer.

When you add critical illness cover to your life insurance policy, you’ll be given a list of conditions that you’re covered for. If you’re diagnosed with one of these, you’ll be able to make a claim.

In most cases, critical illness cover will pay out for:

  • Heart attacks
  • Strokes
  • Non-terminal cancers
  • Life-changing injuries
  • MS
  • Parkinson’s
  • Organ transplants

Some policies are more comprehensive than others, and will cover a longer list of conditions – it’s worth checking the policy wording carefully so you understand what you’re covered for before you buy.

What isn't covered by critical illness insurance?

Pre-existing conditions won’t be covered by your critical illness policy. Otherwise, what is or isn’t covered really comes down to the wording of your particular policy. It’s vital to answer all the questions on your application fully and accurately, otherwise you could invalidate your cover.

Among the things that might not be covered by some critical illness insurance policies are certain permanent disabilities that result from illness or injury, organ failures/organ transplants, Alzheimer's disease and paralysis.

Do I need critical illness cover?

Would your family struggle financially if you or your partner suffer a critical illness or life-changing injury? If the answer is yes, then you could need critical illness insurance.

Statutory sick pay can help if you can’t work, but it’s unlikely to be enough to cover your loss of earnings.

And as statutory sick pay is paid for only 28 weeks, you could soon be left with no income at all.

But there are some scenarios where critical illness cover is more useful than others.

You may need it if:

  • You have financial dependents
  • You’re still repaying a mortgage
  • You’re renting

But it might not be suitable for you if:

  • You have no dependents
  • You have savings you could live off
  • You’re of retirement age

How to get a quote

When getting a quote, you’ll have the option to add critical illness cover.

  • Enter your details to get a life insurance quote.
  • Add critical illness cover to your policy, you can do this by selecting ‘Add cover’ when you get your life insurance quotes.
  • Choose your cover level, you can select combined or additional cover. You’ll also choose the amount of cover if you go for the latter.

There are a few details we need from you, so it’s worth having these to hand before you start:

  • Your name and age
  • How much life insurance and critical illness cover you want
  • How long you want to be covered for
  • A brief outline of your medical history
  • Details of any pre-existing conditions you might have

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How much critical illness cover do I need?

Critical illness insurance can be used to cover mortgage payments and monthly outgoings. It can help you and your family maintain quality of life and living standards should you lose your earnings due to critical illness or life-changing injury.

Most people use critical illness pay-outs to:

  • Pay off a mortgage
  • Cover bills
  • Support family outgoings

But how much critical illness cover you need depends on you and your family’s monthly expenditure – the level of mortgage payments, bills and other regular spending can vary greatly from one family to the next.

Before you take out critical illness cover, it’s worth adding up all your family’s monthly spending, including those mortgage payments. You should consider the duration of your mortgage and how much is left to pay as well as how long you think your children will be dependent on you.

How much is critical illness cover?

Generally, the higher the level of cover you choose, the more expensive your monthly payments will be.

Insurers will look at multiple factors to calculate the price, including your age, health condition and medical history.

In general, the insurers we work with only offer critical illness cover as a life insurance add-on. To get it, you’ll have to take out a life insurance policy first and work out how much cover you'll need.

With that in mind, here’s what each age could typically pay for both level-term and decreasing-term life insurance with additional critical illness cover:

Age Level-term monthly cost1 Decreasing-term monthly cost2
18
£4.73
£4.50
25
£5.96
£5.00
30
£7.76
£5.74
40
£13.70
£9.20
50
£26.99
£18.84

1. Based on £100,000 of level-term cover over 20 years, non-smoking male with no underlying heath conditions (Feb 2022) including £10,000 critical illness cover.

2. Based on £100,000 of decreasing-term cover over 20 years, non-smoking male with no underlying heath conditions (Feb 2022) including £10,000 critical illness cover.

What our life insurance expert says

It’s crucial to understand the two types of critical illness cover. Combined cover can be cheaper, but it only pays out if you’re sick or pass away. Additional cover pays out in both scenarios, but it can be a little pricier. Think about what’s right for you before you take out a policy.

Louise Thomas - Personal Finance, Mortgage and life insurance expert signature

Louise Thomas

Life insurance expert

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How long does critical illness cover last?

Your critical illness cover runs for as long as your life insurance policy, or until you make a claim.

If you have mortgage life insurance, it’ll run for as long as your mortgage.

If you have level term life insurance, you can choose how long you want to be covered for. Most people tie this to how long their family will be dependent on their income. If you have young children, this could be 20 years, but it could be longer.

You can even get whole life insurance that’ll cover you until the day you die, with added critical illness cover that’ll do the same.

There’s no expiration date for your critical illness insurance. As long as it’s within the cover period of your life policy, you’ll be eligible for a pay-out.

What can I use my critical illness cover pay-out for?

You can use your pay-out for whatever you want, but most people use it to:

  • Cover their expenses, or their family’s expenses, if they’re unable to work
  • Pay off their mortgage, taking some of the financial strain off their loved ones
  • Pay for private healthcare if they need it, although health insurance is often a better option
  • Make changes to their home or car if they’re left with mobility issues after an accident or illness

Is critical illness cover different to terminal illness cover?

Terminal illness cover pays out if you’re diagnosed with a condition that limits your life expectancy to 12 months or less. Most life insurance policies will include this as standard, meaning that you’ll get your pay-out while you’re still alive, whether you have critical illness cover or not.

But if you’re diagnosed with a non-terminal condition - one that isn’t expected to kill you immediately - you won’t get a pay-out from your life insurance. Critical illness cover ensures you will. As long as your condition is covered by your policy, and is severe enough to be classed as critical, you’ll be able to claim.

Can I claim on my critical illness insurance more than once?

No, critical illness cover is a one-time safety net. Once you claim, your cover ends.

With additional cover policies, your life insurance cover will continue after you claim on the critical illness aspect of your policy. You just won’t be able to claim for a second critical illness.

If you have combined cover, both your life insurance and critical illness insurance policies stop after you claim. If you want your life insurance cover to continue, you’ll then have to sign up for a new policy.

If you still want critical illness cover after claiming, you can take out another policy. To do this, contact your insurer to see what they can offer you. Or get another quote.

What happens if I don’t claim on my critical illness cover policy?

If you reach the end of your life insurance cover term without claiming on your critical illness policy, your coverage will simply end. You won’t be able to get back what you’ve paid in premiums.

The same is true if you pass away during your cover period without having claimed for a critical illness. Your loved ones will get your life insurance pay-out, but they won’t get back what you’ve paid in critical illness cover premiums.

Even so, the peace of mind that critical illness insurance can bring is often worth the extra you’ll pay in premiums. Cover can vary between insurance providers, so it's important to check the level of cover that your policy provides.

Income protection vs critical illness cover

Both income protection insurance and critical illness cover can help keep you afloat if you’re ill or injured. But they work in very different ways.

Where critical illness insurance pays out a lump sum to help you focus on your recovery if you become severely ill, income protection is designed to cover your outgoings if you suffer a milder illness or injury. It pays a portion of your salary to help you maintain your standard of living while you’re on the mend. If you have a physically demanding job, but hurt your back and can’t work, for example, income protection can help bridge the gap until you’re fit to work again.

Critical illness cover is designed to ease the financial burden of a life-changing illness or injury, taking some of the stress out of an already stressful situation. What policy you choose to take out depends on what you want to be covered for.

Can you get critical illness cover for children?

Yes. Some critical illness policies will cover your children at no extra cost. Others may ask you to pay a little extra to cover them.

Cover for a child works in much the same way as an adult. If your child is injured or develops a serious condition, your policy will pay out. But the amount you’ll receive is usually lower for a child than for yourself, with the maximum being around £25,000. This can still help ease some of the financial burden of having a seriously ill child, giving you some breathing space to focus on what really matters – them.

Is critical illness cover taxable?

No, the pay-out you’ll get from a successful critical illness claim is tax free. You’ll be given it in one lump sum payment that you can spend how you wish.

This isn’t the case with life insurance, where your pay-out might be subject to inheritance tax if the total value of your estate is over the £350,000 tax-free threshold.

If you want to make sure your loved ones get your full life insurance pay-out tax free, see our guide on writing your life insurance in trust.

Can I get critical illness cover without life insurance?

Although some insurers may provide it, it can be tricky finding critical illness cover as a standalone product. The insurers we work with provide critical illness cover as a life insurance add-on. It’s there to give you an extra level of protection, with the aim of giving you the level of cover that you need. As always, we recommend that you check the level of cover that your policy provides before purchasing.

Do I still get a life insurance pay-out if I claim on my critical illness cover?

If you have additional critical illness cover, yes. Once you claim, your critical illness policy ends, but your life policy continues. As long as you keep paying your life premiums and pass away within your cover term in a way that’s covered by your policy, your beneficiaries will get a pay-out after you die.

With combined cover, you’re merging your life and critical illness policies into one product. You’ll only get one pay-out, either after you die or if you become critically ill. After that, your life policy ends and you’re no longer covered.

When should I get critical illness cover?

As with life insurance, the younger you are when you take out critical illness cover, the cheaper it’ll be.

Most people take out life insurance after a big life event, like buying a house or having a child. Once you have dependents, and serious financial commitments like a mortgage, it makes sense to cover yourself in case the worst happens.

However, it’s never too late to take out cover. Over 50 life insurance is available, no questions asked, until age 84. Even if you’re not in the best of health, you’ll still be able to find cover.

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