10 min Read
17 May 2017

Written by Damien

Damien is one of the most widely quoted money and investment experts in the national press and has made numerous radio & TV appearances. He created MoneytotheMasses.com while working in the City when he became disillusioned with the way the public were left to fend for themselves because they could not afford financial advice.

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Best and cheapest critical illness cover in the UK

Best and cheapest critical illness cover in the UK

Best and cheapest critical illness cover in the UK

What is critical illness insurance and how does it work?

Critical illness insurance is a policy that will pay out a lump sum if you are diagnosed with one of the critical illnesses specified in the policy document. Unlike standard life insurance a critical illness policy will payout a tax-free lump on diagnosis of an illness rather than in the event of death. If you are diagnosed with a critical illness you may not be able to continue working so the proceeds from this type of policy can help maintain your family's standard of living. You can buy critical illness insurance as a standalone policy or as a policy that combines life insurance with critical illness cover, sometimes called death and critical illness cover. I cover this in more detail later.

What illnesses and conditions does critical illness insurance cover?

All critical illness policies cover heart attack, stroke and most types of cancer (although there are exceptions). Other illnesses covered vary between critical illness insurance providers but may include some or all of the following:

Critical Illnesses typically covered by critical illness insurance

  • Heart attack
  • Stroke
  • Cancer
  • Alzheimer's disease
  • Dementia
  • HIV infection
  • Kidney failure
  • Liver failure
  • Parkinson's disease

Many of the illnesses covered will depend on the severity and medical prognosis. A detailed list of conditions will be provided by the critical illness provider.

Illnesses typically NOT covered by critical illness insurance

  • Non-invasive cancer
  • Injuries such as broken bones
  • Pre-existing conditions prior to application
  • Hypertension (abnormally high blood pressure)

Essentially, if the diagnosed condition will drastically shorten life expectancy then cover is likely to be provided. With the advances in medical diagnoses and treatment some illness may not be covered that were once considered critical. Always check the illnesses covered and qualifying conditions prior to taking out or replacing a critical illness policy.

What types of critical illness cover are there?

Standalone critical illness insurance

This is a policy that pays out a lump sum only if a critical illness is diagnosed within the term of the policy. This is the cheapest form of critical illness insurance but does not provide life cover, only critical illness cover.

Combined life insurance and critical illness cover

This is a policy that pays out a lump sum if you die or are diagnosed with a critical illness within the term of the policy. Typically there is only one potential payout with this type of policy, if you claim for a critical illness then the life insurance cover will cease.

Part of a (decreasing term) mortgage protection life insurance policy

Mortgage protection life insurance is the cheapest form of life insurance (because the sum assured decreases over time) and is designed to pay off your mortgage in the event of death within the term of the policy. However, if you were diagnosed with a critical illness and unable to work your monthly mortgage payments would still need to be paid. Adding critical illness cover to your mortgage protection insurance would pay off your outstanding mortgage if you were diagnosed with a critical illness thus protecting your family's financial future.

Fixed vs Reviewable critical illness policy

Some critical illness policies offer the option to have a fixed premium during the policy term or a reviewable premium with the prospect of premiums reducing (or increasing) during the policy term.

With the fixed premium option premiums will remain at the same level throughout the policy term.

With the reviewable premium option your policy will be reviewed after a period of time, typically every 5 years, and premiums may be reduced due to medical advancements or your age.

Who should get critical illness cover and is it worth it?

If you are a partner or have a dependent family then life insurance is essential to protect your family's financial future. To provide greater protection for their future it would be prudent to include critical illness insurance as part of the same life insurance policy or as a separate contract.

According to Friends Life

  • 1 in 3 people will develop some form of cancer in their lifetime
  • 50,000 men and 32,000 women suffer a heart attack in the UK every year
  • It is estimated that 1.3 million people living in the UK have survived a stroke
  • Around 7 out of 10 sufferers survive a stroke
  • Many of those suffering a critical illness will not be able to work again

The amount of critical illness cover will be dependent on your personal circumstances and your available budget. As a minimum, the level of cover should be enough to pay off your outstanding mortgage in the event of being diagnosed with a critical illness.

How much does critical illness insurance cost?

The cost of critical illness cover will depend on the following:

  • Age
  • Gender
  • Medical history
  • Lifestyle
  • Sum assured
  • Term

Each application for critical illness cover is assessed individually and premiums and cover provided could vary widely between people of the same age, depending on their medical history and lifestyle. However, as a rough guide £100,000 of life insurance with critical illness cover over 20 years for a 30 year old non-smoker would be around £25 per month. The premiums would rise to around £45 pm for a 40 year old non-smoker and just over £100 pm for a 50 year old non-smoker.

What to look for when considering critical illness cover and how to get the best life insurance for you

If you are considering critical insurance cover then you need to have a clear idea of the following:

  • How much cover do you need?
  • How long do you need the cover for?
  • Do you want to combine critical illness cover and life cover in one policy?
  • Do you want the premiums to be guaranteed or reviewable?
  • Any medical conditions that you currently have or in the past

Once you have a clear idea of what you are looking for in a critical illness policy then you should decide the best critical illness cover provider for you by considering the following:

  • Number and type of illnesses covered
  • If diagnosed with a critical illness at what stage will payment be paid?
  • How soon after diagnosis do you have to make a claim?
  • Will they provide cover and the term you require?
  • Are the premiums within your budget?
  • Are there any exclusions within the policy?
  • What is the provider's track record on paying out claims?

Best Companies for Critical Illness Cover Payouts

There are dozens of critical illness insurance providers, such as Aviva and Zurich, but it is very difficult to make a judgement on which is the best critical illness provider overall due to the number of variable factors to be considered. However, you should consider the following areas (in addition to those above) when choosing a critical insurance provider.

  • Reputation of provider
  • Clarity of policy wording
  • ABI approved illness definitions

According to the Association of British Insurers 93.1% of claims were paid out in 2015.

How to compare critical illness cover

When researching any insurance product you should engage the services of an expert in the field who can research the market on your behalf and find the best critical illness insurance policy as well as the cheapest for your needs.

I personally recommend Drewberry Insurance whose excellent service I have personally vetted. They will save you time and money in your search for the best cover available to meet your needs. The first step is to use their critical illness cover comparison tool. Chose whether you want a level or decreasing sum assured and how much life and critical illness cover you want. The tool compares the entire market but bear in mind that the premiums quoted do not take into account your personal medical history. That's why it's important to enter your contact details so that Drewberry can contact you to advice you which insurer would ultimately be most favourable for you.