What is critical illness cover?
Unfortunately, there is a statistically-high chance that illness could interfere with bigger life plans. For most of us, a routine monthly income is the fuel that empowers a way of life. In its absence, the financial tension of poor health could hurt more than just recovery time.
Could you, for example, continue to afford your family’s lifestyle without a regular income? How about honouring the mortgage repayments on time? What if you have financial dependants, like young children, who need caring for?
Critical illness cover is dedicated to helping solve this life problem: to offer financial relief on the occasion that poor health could frustrate our future wealth. With a policy in place, you can ensure that your routine monthly income isn’t jeopardised by nagging health issues – so, you can focus on refinding your strength.
Critical illness cover, used interchangeably with critical illness insurance, pays out a tax-free lump sum of cash if you become diagnosed with a life-altering serious illness or medical condition covered in the specifics of your policy.
Every listed illness, or condition, will be regulated by a definition. These are measured up against the severity of an illness or condition.
How does critical illness cover work?
Critical illness cover can be purchased as a stand-alone policy, detailed to your individual circumstance and preferences, or as a combined offering, which involves a life insurance policy. This affords you full ownership to build out a policy that sensibly reflects your way of life, goals and budget.
Whilst there’s popularity in both routes of cover, the options read as follows:
With this option, you will be paying out for only a critical illness cover policy as your top layer of protection. This means you won’t own a traditional life policy, limiting your cover to illness or injury, rather than death. Alternatively, you can run this cover parallel with a separate life insurance policy.
A combined proposition adds critical illness cover into a life insurance policy as an optional layer. The two will be taken out concurrently, or at the same time, whereby your costs will be paid under one inclusive premium.
How can I get cheap critical illness cover?
A combined cover offering gives you greater totality of cover, with only the one affordable premium. A standalone option, however, will keep policies separate, yet running jointly, and will involve multiple pay-outs. A standalone cover will expire once a valid claim is issued, so it’s worth thinking about protection in layers, or how you can get more mileage out of your protection by adding in life insurance, or other life products.
Are all policies the same?
No two policies are the same, but can they can share a likeness.
Ultimately, the differences between policies will be determined by the listed illnesses that you’re covered for – which can influence the amount of pay-out you receive.
Yet, there are certain, if key, details that elevates your policy from a good fit to perfect one.
Dependant on how you arrange a policy, you can tweak how much, and for how long, you’re covered for.
- What is a “term”?
Every policy will be bookended by its start and end dates, which captures its period of activity. This length against your policy is known as a term.
- What is a “sum assured”?
Your policy will contain a total sum that, in the eventuality of a claim, will be issued to you and your loved ones. This should accurately reflect your expectations of financial compensation. A sum assured is the amount you’re covered for, expressed as a total value held in a policy. This will sometimes be known as the “pay-out” of a policy.
Am I eligible for cover?
If you’re a UK resident wanting greater security from your life policy, then critical illness could be a valid option.
Commonly, people consider it if:
- You can’t comfortably maintain your lifestyle on your savings alone.
- You don’t currently receive an employee benefits package to protect yourself against long periods of sickness-related absence.
- You have retainer debts, like a mortgage, that must be honoured.
- You want to limit disruptions to your family’s way of life.
How much critical illness cover do I need?
It shouldn’t feel like a riddle to solve your finances. Instead, there are tools to help you select the right amount, or sum assured, that you require in your cover plan. This should as accurately as possible reflect the value you want to hold in your policy.
This calculation should consider all things about your financial wellbeing, such as:
- What is the total debt, and monthly payments, required to meet my mortgage?
- What are my routine monthly outgoings?
- What might my medical expenses total – consider treatment, extra care, or any home mobility adjustments?
- What, if any, are my outstanding debts or loans?
Can I cover my mortgage?
One of the most popular, if casual, uses of critical illness is to make sure mortgage payments can be met. Often the sum assured is evaluated as the balance of an existing mortgage – to ensure, at least, that your home is protected.
Future-proofing your finances
Tallying up the current expenses, outgoings and debts in your life is a strong starting point for thinking about your level of cover – or the basic financial value you need to meet in your policy. Yet, it is essential to look ahead in your calculations, too. Your preferences might change in the future, which is why this project of evaluating your finances should be a dynamic one.
What does critical illness actually cover?
You control how your benefit is spent.
- Extended medical treatments, sometimes in privatised healthcare.
- Proxy income or ensuring that you can meet routine expenses.
- Adapting the home for better mobility.
- Focusing on recovery time.
What does critical illness not cover?
As every policy will detail a list of illnesses – and definitions – it’s important to check what’s actually included (and what’s excluded). Any pre-existing conditions won’t generally be covered by your policy, nor will some serious illnesses.
For a better grip on how insurers define the conditions that appear in a policy, visit the Association of British Insurers (known as ABI).
Clarifying an illness by its definition
The safest way to secure your benefit is to understand not only the coverage of illness types, but how they’re being defined by your specific insurer. As a general guiding rule, or the language used by the insurer should clarify how illnesses are defined.
As you shop around, those definitions will change. This makes the purchase even more personal. It’s essential to read how your policy addresses illness and injury to stay ahead of any complications.
How much is critical illness cover?
Similar to life insurance, the costs of a policy aren’t universal. Instead, your premiums will reflect the amount and length of your cover, the types of illnesses in your policy and any risks you pose to the insurer.
There are certain attributes that can increase your premium.
Generally, the younger you are the cheaper the premium. This is often what makes a strong case for young applicants, such as millennials. Access to affordable quotes, with lower premiums, can be a persuasive advantage for a younger adult seeking life protection.
- Medical history & general wellbeing
This falls at the discretion of the insurer and may impact the value of your premium.
- Family History
This may be part of an insurer’s evaluation of your health.
- Lifestyle (such as Smoking)
This category details your hobbies and any risks imposed on your overall life and health. Certain hobbies, such as sporting activities, can increase the risk in your life and therefore may add to your premiums. Likewise, smoking or nicotine consumption can work unfavourably for you. This doesn’t disqualify you from finding cover, but may influence your premiums.
- Level of cover
How much are you looking to cover? This value can impact the price of your premium
- Combined cover
Because you have multiple policies, offering up a stronger layer of protection, you will likely have a higher premium than that of a stand-alone policy.
- Who’s on the policy?
A joint policy will increase the premium but may be cheaper than taking out multiple policies.
- What’s covered?
Every policy will specify (and define) illness differently. This can guide pricing, so it’s worth reading into what you’re actually covered against.
Will my premiums change at all?
Once a policy is active, your premiums remain fixed throughout a policy’s lifespan, unless you amend your cover offering.
What is risk?
Insures will use risk as a metric when evaluating your application. Risk, broadly, defines your proximity to general hazards, or any harm that could be influenced by a risky profession, hobby or pastime.
Who can I cover?
A joint policy will cover two people at the same.
This is often a more affordable alternative than taking out two policies simultaneously. Yet, only one claim can be made per policy. So if, for example, one partner became ill and makes a valid claim, then the remaining name on the policy will no longer have cover.
In the event that a claim is issued, you can apply for a new policy in the future. Any changes to your medical history, or wellbeing, will alter accordingly in your premium. The status of health of one partner can inflate the price of the premium for the other. In this scenario, it could be advantageous to take out separate policies. This is an outcome likely best for those finding it harder to budget a joint policy, or desiring a more layered, or comprehensive, scheme of cover.
Can I cover children, too?
The purpose of critical illness cover is to ensure financial safety in lieu of a diagnosis that could frustrate your family’s income. Often with policies, there’s an option to make a claim for a child diagnosed with a critical illness, too.
Can smokers get critical illness cover?
A health audit is part of the application.
The health-risks associated with smoking aren’t favourable either, so you are likely to pay higher premiums. Most insurers will define smoking as the consumption of nicotine or tobacco within the last 12-months prior to an application.
How long will a policy last?
In life insurance lingo a term, as previously mentioned, defines the period of valid cover in a policy. Critical illness cover is a policy subject to terms, or lengths of time.
The length of cover you need will likely reflect your financial circumstances:
- How much time is left against your mortgage?
- How much longer will others be depending on your finances (do you children, for example)?
- How much do you have set aside in savings?
Lengthier terms held in a policy will add up to a greater premium. Yet, when setting length against your policy, it’s important to note that many insurers have an upper limit, or threshold, against age (usually capped at 70 years of age).
How do I make a claim?
A pay-out, or benefit, will be made upon diagnosis of an illness specified in the policy. And, sometimes, there may be a minimum term before a claim can be made.
Commonly, a claim will be paid as a tax-free lump sum, though this may depend on the severity of the diagnosis.
A life insurance policy, unlike critical illness cover, will need to be written into a trust for the benefit to be issued as a tax-free sum – where anything above the value threshold of £325,000 is subjected to a 40% inheritance tax.
What counts as a critical illness?
Every policy will specify what’s included, from certain conditions to illnesses. It’s imperative that you remain aware of what kinds of illnesses and conditions are curated in your policy (and their definitions.)
Often the UK’s most common conditions are usually featured:
- heart attacks
- kidney failure
- several types of cancers
Any exclusions written into your policy will void claims made against certain conditions or illnesses, which are typically notes on poor health that run hereditarily in your family.
Can I have multiple policies?
Often people learn about critical illness cover when they’re purchasing into a life insurance policy, which is offered as a means of layering up your protection. Stacking up policies is the best way to protect yourself against even more.
Life cover & critical illness, as one
Having a policy that interconnects cover types could give you more mileage in your protection.
Whilst premiums may be higher with layered schemes of protection, it also means that your cover is more comprehensive. Having twin cover types in your policy could equate to multiple pay-outs: your protections layer up to keep you financially safe against illness, injury, or death.
What is life insurance? Read more here.
Lifelong terms & critical illness
Because critical illness has an expiration, it isn’t possible to merge with an insurance type that has a lifetime term against its policy. You could, however, hold two separate policies, having both a whole of life Insurance type, or life assurance, and a nominated critical illness cover.
What is life assurance? Read more here.
How can I find the right cover for me?
As every critical illness plan will cover you for different illnesses and injuries and will contain unique exclusions, it’s important to research how even the smallest of nuances can work favourably for you and your loved ones. This could make the difference between a good policy and a perfect one.
How is critical illness cover & income protection different?
Confusion is common here. Where both insurance types are a sort of defence mechanism, helping you out financially if you become unable to work, there are key differences that set them apart.
What is income protection?
This insurance type sets you up with a proxy income, paid in regular instalments as though a salary. It props you up with a routine financial benefit as you recover. The list of illnesses and injuries are more commonly expansive, too (ranging from minor incidents to more major accidents.)
- A more exhaustive list of illness coverage.
- Pays out routinely like a salary.
- Claims made if you become unable to work.
Unlike income protection, critical illness doesn’t require you to be out of work to make a valid claim.
What is terminal illness cover?
The term critical, not to be confused with terminal, refers to any condition or illness that isn’t already covered by a life insurance policy. Oftentimes, life policies will include a list of terminal illnesses that may pay-out early in the event of a life-threatening diagnosis.
Critical illness is a separate cover type, often defining those illnesses not specified, routinely, in a life policy.
When is the best time to buy critical illness cover?
Those life moments that force us to think ahead are pivotal in shaping our futures. Major moments in our stories encourage us to hatch secure financial plans, such as:
- Buying a home (and, therefore, having a mortgage).
- Experiencing a loss, injury or some threat to your income.
- Assuming a sizable loan.
- Having/ expecting children.
- Adding to your family.
Is it really worth buying critical illness cover?
A policy is a personal document – it should be, above all, meaningful.
The financial sensitivities of your budget considered, a policy is the same thing as a contingency plan. It is more than talks of peaceful planning, but rather a kind of financial sustainability for your family’s way of life both in the present moment and long into the future.
Where can I buy critical illness cover?
Comparing life policies is a process of discovery: you can learn more about the ways of keeping your loved ones protected when you begin searching with us. What’s more, the premiums and conditions of a policy can vary between insurers. Using a comparison site can unlock different ways to save big on time and money, too.
How do I apply for critical illness cover?
Start from an informed position. Early research can guide an offering that suits your lifestyle and those it involves. You might, for example, have tighter budgetary requirements. Or, perhaps, it’s a particular dread list of illnesses that guides your policy decisions.
It can be tricky arbitrating your best cover options.
- What cover is best for me? There’s no universal insurance. It’s a personal decision. You will, then, need to decide what you need out of a policy.
- Compare the market. Using the free online quote form, reach top policy options conveniently. Sites like Life Market remove the routine chores of shopping around to connect you with the better offers.
- Commit to an application. Once happily quoted, activate your policy to have immediate cover.
Compare critical illness cover
It’s a meaningful purchase, so make your search matter.
Make a policy work for your budget and goals, or tailor a policy between cover types – including life insurance with critical illness cover. With Life Market you can access top deals, discounts and more with your every search.