TL;DR
Critical illness cover - key points
Critical illness cover may pay a benefit after diagnosis of a condition listed in the policy wording.
It usually pays a one-off lump sum, and the diagnosis must meet the insurer’s definition. The money can help with mortgage payments, bills, treatment or time away from work.
Not every illness is covered, and definitions, exclusions and premiums vary between insurers and depend on your age, health and lifestyle. It can be bought on its own or with life cover, and it works differently from income protection. Book a free consultation to compare options that fit your situation.
Have you ever wondered what would happen to you and your loved ones if you were diagnosed with a serious medical condition? Critical illness cover is a type of policy that offers protection in the event of a serious medical event. The illnesses that are covered are usually long-term and very serious conditions, such as stroke, heart attack, loss of arms or legs, cancer, multiple sclerosis or Parkinson’s or Alzheimer’s disease.
How does critical illness cover work?
You choose a cover amount and a policy term and pay a regular premium. If you are diagnosed with a condition listed in the policy during the term, and the diagnosis meets the insurer’s definition, the policy usually pays a tax-free lump sum to you. You can use the money however you need, for example to reduce your mortgage, pay bills or cover time away from work. Whether a claim is paid depends on the policy wording, so it is important to understand the definitions before you buy.
For independent guidance, see MoneyHelper’s guide to critical illness cover, or talk to our adviser in a free consultation.
Do I need critical illness cover?
Critical illness cover may be worth considering if your family relies on your income, you have a mortgage or other debts, or you would struggle to cover a long period of recovery from savings. It can also matter if you are self-employed or your employer only offers Statutory Sick Pay or a short period of company sick pay.
Even if you have savings or workplace benefits, it can help to check how long they would last and whether a lump sum would make a serious illness easier to manage financially. The right answer depends on your circumstances, existing cover and budget.
What does critical illness insurance cover?
Critical illness cover pays only for specified conditions that meet the insurer’s definitions. Examples may include certain cancers, heart attack and stroke, but not every diagnosis or severity is covered. Read the definitions and exclusions for the policy you choose.
The covered conditions, medical definitions and exclusions vary between insurers and policy options. Some policies also provide smaller payments for specified less severe conditions. Compare policy wording as well as premiums. An adviser at Extend Finance can explain the differences between available policies.
Some policies include or offer optional children’s critical illness cover. If you are a parent, it is worth checking whether this is included. Read more in our guide to insurance for a child in the UK.
Things to check before choosing a policy
Standalone or combined with life cover. Critical illness cover can be bought on its own or added to life cover. With some combined policies, a full critical illness payment ends or reduces the linked life cover; other arrangements provide separate benefits. Check what would remain after a claim under the policy you are considering.
Level or decreasing cover. With level cover the amount stays the same throughout the term. Decreasing cover reduces over time and is often set up to follow the balance of a repayment mortgage.
Survival period and exclusions. Some policies require you to survive for a specified period after diagnosis. Check whether a survival period applies to your chosen policy and how it is defined. Pre-existing conditions you have disclosed may be excluded, and leaving out medical information when you apply can lead to a claim being refused.
Critical illness cover vs income protection. Critical illness cover pays a one-off lump sum after a covered diagnosis. Income protection pays a regular monthly benefit if a covered illness or injury stops you working and the policy’s definitions and conditions are met. Some people choose one; others combine both.
How much critical illness cover do I need?
The amount of cover you need depends on your circumstances. Think about what you would want the lump sum to pay for if you became seriously ill: your mortgage or rent, other debts, everyday bills, childcare, private treatment or adaptations to your home. It also helps to consider your savings, any workplace benefits and how long your household could manage on reduced income.
Our advisers can help you work out a suitable level of critical illness cover and compare policies. All insurance consultations and advice are free and without obligation, including follow-up discussions; the insurance premium is payable if you choose a policy.
Frequently asked questions
How does critical illness cover work?
You choose a cover amount and term, then pay premiums to keep the policy active. A claim normally pays a lump sum when a listed condition meets the insurer’s medical definition and the other claim conditions, including any applicable survival period. A serious diagnosis alone is not enough: the definition may specify severity, treatment or lasting effects, so compare the wording as well as the price.
Is critical illness cover the same as life cover?
No. Life cover primarily provides a benefit after death, whereas critical illness cover can pay while you are alive following a qualifying illness. The two can be separate or combined: with some combined policies, a full critical illness payment ends or reduces the linked life cover, while other arrangements provide separate benefits. Check what would remain after a claim before relying on one policy for both needs.
Does every cancer, heart attack or stroke qualify?
No. These conditions are commonly included, but the diagnosis must meet the precise definition in your chosen policy. For example, the wording may distinguish between stages or types of cancer, or require specified evidence of a heart attack or lasting effects after a stroke. Exclusions and any smaller benefits for less severe conditions also vary, so the number of illnesses listed does not tell you the whole scope of cover.
Can I get critical illness cover with an existing medical condition?
It may be possible, but the insurer assesses your medical history and other relevant information through a process called underwriting. Depending on the condition and insurer, an offer may have a higher premium or an exclusion, or the insurer may postpone or decline the application. Answer the questions fully and accurately and check any exclusions in the actual offer; a quotation alone does not confirm that an existing condition is covered.
How is critical illness cover different from income protection?
Critical illness cover usually pays a lump sum for a specified condition meeting its definition, whether or not that diagnosis stops you working. Income protection provides regular payments when illness or injury causes an inability to work that meets the policy’s definition, normally after an agreed waiting period and within benefit limits. They address different risks: one can help with a large financial need after a covered illness, while the other can help replace part of lost earnings.
Do policies offer partial or additional payments?
Some policies pay a smaller benefit for specified less severe conditions or include additional benefits, such as certain children’s illnesses. The conditions, limits and effect on your remaining main cover depend on the product; these features are not included in every policy. Check whether a payment reduces the main insured amount and whether further claims are possible, rather than assuming that an additional benefit leaves everything else unchanged.
Can a critical illness payout help with my mortgage?
A qualifying lump-sum payment could help meet monthly mortgage payments, reduce borrowing or fund other needs while you recover. The policy does not automatically repay the mortgage: the available amount, who receives it and any linked life cover depend on how it is arranged. Compare the cover amount and term with your borrowing and, before making a lump-sum repayment, check whether your mortgage has early repayment charges.
What happens to my cover after a critical illness claim?
A full payment commonly ends the critical illness cover, but the outcome depends on the policy structure and the benefit claimed. A partial or additional payment may leave some cover in place, and combined life cover may end, reduce or continue under its own terms. Check the insurer’s confirmation of the remaining benefits and premiums before assuming you can claim again or that your family still has the same life cover.