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

15 min Read Published: 14 Oct 2021

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 illnesses 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 tax-free lump sum on diagnosis. Normally the policyholder must survive between 10-14 days 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 the three core conditions as stated by the Association of British Insurers (ABI) and these are cancer, heart attack and stroke. Additional critical illnesses that most, if not all insurance companies cover are coronary artery bypass, kidney failure, major organ transplant and multiple sclerosis. In addition to this most critical illness policies will pay out if the policyholder becomes permanently disabled due to injury or illness although some only include this at an extra cost.

Pre-existing medical conditions are unlikely to be covered but every person is assessed individually so the offer of critical illness insurance will depend on the specific medical condition, when you suffered it and your current health. A specialist critical illness insurance adviser will be able to decipher which policies will be of best value based on your health. Read on to find out how to contact one.

Policies will usually cover a total of 25 or more other conditions, with many covering in excess of 65 illnesses. This varies from insurance company to insurance company so you will need to check the details carefully. A critical illness insurance policy only pays if your diagnosis matches an illness that is covered by your policy and meets the specific definition of that illness

Importantly, for many years, insurance companies have competed based on the number of illnesses that are covered by their critical illness policies which lead to some splitting covers in 2 just to win the numbers game. There are insurance companies that have gone against this now and have amended the covers to provide more wide-ranging cover to allow more people to claim without increasing numbers of illnesses. This is a complex area and the quality of a critical illness policy might not be clear to someone who does not work in this area. This is why I suggest that you speak with a critical illness insurance expert to understand which policies provide you with the most comprehensive cover. I'll explain how to arrange to speak to one later on in this article.

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, whichever is sooner. With a combined life insurance and critical illness insurance policy, the premiums would be cheaper than two separate policies as there is only ever one lump sum paid out by the insurance company.

Critical illness cover is usually 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 take time off work to recover. A critical illness policy can also help you to pay for any alterations you may have to make to your home if you become disabled. So if you have dependents relying on you for an income and state benefit will not be enough then critical illness insurance is worth it and provides peace of mind for many.

If you are considering critical illness insurance then you should act now and while you are in good health 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 that reduces over time. They are designed this way to cover what is outstanding on the mortgage but 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, such as:

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

Furthermore, critical illness insurance shouldn't be selected purely on price as the quality of the cover varies quite a lot between policies and price needs to be weighed up alongside the quality of the benefits within the policy as well as the range of illnesses covered. Some critical illness insurance policies are very basic and cover only three key conditions whereas others provide extensive lists of illnesses including some less serious illnesses for which there may be a partial payment, making them more valuable. That being said, cost doesn't always indicate quality as we have seen some basic critical illness insurance policies provided at higher prices than those that offer more comprehensive cover for illnesses.

This is why we believe that you're best served by speaking to a specialist critical illness insurance adviser who will be able to work out your priorities and budget and suggest the best critical illness insurance policy for you. You'll find details of who to get in touch with one a little further in this article.

What is the application process for critical illness cover?

As with all types of insurance, you will need to complete an application form that 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 about how an independent critical illness specialist can help to search for the best policies on the market as well as help you complete 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, in comparison to life insurance at least, a little expensive - £100k of life insurance for a male non-smoker aged 35 would cost £6.00 per month for a 20-year term, whereas the same level of critical illness cover would cost £30 per month for a 20-year term.

The above figures assume that you are accepted at the insurance company's standard price for the cover which means that only your age and smoker status have been used to assess the monthly premiums.

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

  • There are over 200 different types of critical illness covers 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, chase the insurer on your behalf and they have a specialist claims department which means they'll be in 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 up to £100 cashback if you are happy and decide to buy a policy.

Find the best value critical illness insurance for you*

Complete the short form and receive a call back at a time that is convenient for you. LifeSearch is rated 4.9 out of 5.0 and has received over 16,000 independent reviews on Trustpilot.

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 how it will be assessed.
  • 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 look at 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 – 2020

Insurance company Successful Claims
AIG n/a
Aegon 93.0%
Aviva 92.7%
Legal & General 92.0%
LV= 92.0%
Royal London 92.4%
Vitality n/a
Zurich 87.0%

Conclusion: Critical Illness cover – is it worth it?

Critical illness insurance should be considered as 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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