Critical illness insurance – what is it, and is it worth having?

11 min Read Published: 09 Apr 2020

critical illness cover is it worth itMost people imagine that a serious illness only happens to other people. However the true picture is quite different - 25% of women and 20% of men will suffer from cancer or a heart attack before they reach retirement age.

We often consider what would happen to our families if we were to die prematurely but rarely consider the effects of a critical illness. Critical illness can have a devastating effect on a family, whether it is just paying the bills or extra costs involved in adapting a home or travelling for hospital treatment.

What is critical illness insurance and is it worth it?

Critical illness insurance is designed to ease the financial pressures of suffering from a serious illness by paying out a lump sum on diagnosis. Normally the policyholder must survive one month before the policy will pay out. Critical illness cover should not be confused with income protection insurance as the latter pays out an 'income' in the event of you being unable to work due to sickness or an accident. For more information see my article 'What is the difference between income protection and critical illness insurance?'

So is critical illness cover worth it?

What is covered under a critical illness policy?

All policies should cover seven core conditions - cancer, coronary artery bypass, heart attack, kidney failure, major organ transplant, multiple sclerosis or stroke. In addition to this most critical illness policies will pay out if the policyholder becomes permanently disabled due to injury or illness.

Policies will usually cover a total of 25 or more other conditions, but this varies from insurance company to insurance company so you will need to check the details carefully.

Often critical illness cover can be added to a life insurance policy where payment is made on either diagnosis of a critical illness or death, which ever is sooner. With a combined life insurance and critical illness policy the premiums would be cheaper than two separate policies as there is only ever one lump sum paid out by the insurance company.

Normally critical illness cover is available for people between the ages of 17 and 70.

Why should I consider critical illness insurance?

Most people feel that life insurance will cover the needs of their family if they should die prematurely, but suffering from a critical illness or long term disability can be just as devastating financially. It is unlikely that you will be able to carry on working and so critical illness insurance can help to bridge the gap while you recover. A critical illness policy can also help you to pay for any alterations you may have to your home if you become disabled. So if you have dependents relying on you for an income then critical illness insurance is worth it.

If you are considering critical illness insurance then you should act now as due to advances in medical technology and an increase in claims (a result of more people surviving critical illnesses) many insurance companies are reviewing their policies. This could result in a reduction of the illnesses covered or an increase in premiums for policies taken out in the future.

Also, I would think carefully when linking critical illness cover to a mortgage protection policy as the amount covered reduces over time. This would leave you with little or no critical illnesses cover at a time when you are most likely to suffer.

How much does critical illness insurance cost?

The cost of critical illness insurance will depend on a number of factors

  • Age
  • Smoker/non smoker
  • Current health, weight and family medical history
  • Occupation
  • Any dangerous sports or hobbies
  • Amount of cover

What is the application process for critical illness cover?

As with all types of insurance you will need to complete a proposal form which will ask if any members of your family have suffered from any serious illnesses. If they have then your policy may be rated, meaning that you will pay a higher premium to be covered for certain illnesses or you may be offered a policy with an exclusion. You may also need to undergo a medical which is a fairly standard procedure for applicants of a certain age or medical condition.

It goes without saying that you should be honest and provide complete information to the insurer when applying for any critical illness insurance. If you do need to claim the insurance company will investigate your medical history fully in a bid to uncover any undisclosed information. We explain more later how an independent critical illness specialist can help to search for the best policies on the market as well as helping with completing the forms.

Is critical illness insurance worth it?

I guess, as with any insurance, if you need to claim then the policy has been good value. I would point out, however, that critical illness insurance is rather expensive - £100k of life insurance for a male non-smoker aged 35 would cost £7.50 pm for a 20 year term, whereas the same level of critical illness cover would cost £28 per month for a 20 year term.

The above figures assume that you are accepted at ordinary rates and have no illnesses excluded.

Are there any things I need to be aware of when considering critical illness insurance?

  • There are over 200 different types of critical illness cover available which can vary from policy to policy and so obtaining advice from a financial adviser or critical illness specialist is crucial. I would suggest that you speak to a specialist independent critical illness broker, such as LifeSearch. LifeSearch* will not only help you to get the best quote, but they will also ensure that the policy is tailored to your specific needs meaning you get the very best policy for your money. Additionally, they will help you to complete the application forms over the phone, they will chase the insurer on your behalf and they have a specialist claims department which means they will fight your corner if you ever needed to claim on the policy. Once you receive your quote there is no obligation to take things further, however you will qualify for £50 cashback if you are happy and decide to take a policy.

Find the best value critical illness insurance for you*

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Find the best value critical illness cover*
  • When considering critical illness cover always check the policy details carefully making sure you understand the illnesses covered. Remember cheapest is not always best when it comes to critical illness insurance.
  • Ensure you understand what constitutes a claim in regard to both seriousness of the illness and the extent of any disability
  • Check whether the premiums are fixed or reviewable as reviewable plans start off cheaper but can quickly become more expensive over time
  • Check whether the policy includes additional children's critical illness cover and check how much is included

I have heard that many critical illness insurance claims are being rejected, is this true?

As you can see from the table below the number of successful claims is very high with the main reason for declining being as a result of not meeting the correct definition.

Insurer Critical Illness Claims Statistics – 2018

Successful Claims
AIG 94.0%
Aegon 93.0%
Aviva 92.6%
Legal & General 93.0%
LV= 89.0%
Royal London 91.0%
Vitality 91.2%
Zurich 91.0%

Conclusion: Critical Illness cover – is it worth it?

Critical illness insurance should be considered as a part of your overall financial planning but, due to the high premiums, may not fit within the budget of some. But don't be put off, some cover is better than no cover and by reducing the sum assured or the term of the policy you can reduce the premium. Always seek independent financial advice or use a specialist protection adviser and check the policy details fully before purchasing.

If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. The following link can be used if you do not wish to help Money to the Masses and do not wish to qualify for the cashback referred to in the article – LifeSearch 

  1. Hi Damian
    Great read on your site

    My question is I had prostate cancer back in 2014 had the operation and had it removed completely. I now have had a full recovery and now been discharged from.the clinic.
    I had a life cover with legal and general insurance. With part of my mortgage at the time .am I still entitled to a pay out from them the policy finish when I closed my mortgage in 2015
    Regards mark

    1. Hi Mark

      If you only had life insurance on your Legal & General policy then you would not be able to make a claim as you have made a full recovery (glad to hear it) and life insurance only pays out for death. However, if your policy had critical illness included (not to be confused with terminal illness insurance) then there is a possibility that you could still make a claim and I have personally seen this in the past.

      Premiums on your policy would need to have been up to date at the point of claim and you would need to meet the critical illness definition. Critical illness definitions can change over time, currently, Legal & General’s definition for prostate cancer is as follows:

      All tumours of the prostate unless histologically classified as having a Gleason score of 7 or above or having progressed to at least clinical TNM classification T2bN0M0.

      I hope this helps

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