Is critical illness insurance worth it?

11 min Read Published: 17 Jun 2024

Critical illness insurance – what is it, and is it worth having?Most people imagine that a serious illness only happens to other people or those who do not prioritise good health. 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.

Besides the physical and emotional impact, serious illness can cause varying degrees of financial hardship due to lost earnings if you become unable to work as well as extra costs such as childcare costs or the cost of making adaptations to your home or vehicle. We often consider what would happen to our families if we were to die prematurely but rarely consider the effects of a critical illness.

Much like any insurance, critical illness insurance is a way to protect you and your household so that you can keep paying your existing household bills and fund any new costs that may arise.

1 minute summary - Is critical illness insurance worth it?

  • Critical illness insurance pays out a tax-free lump sum cash payment if you are diagnosed with a critical illness that is listed on the provider's policy document
  • You could receive a payout and still go on to make a full recovery
  • Children can be covered for serious illnesses at no extra cost
  • It is more expensive than life insurance as there is a higher likelihood of you claiming
  • Critical illness cover varies across insurance companies – some cover more conditions than others
  • You can bring down the cost of critical illness insurance cost by combining it with life insurance or tailoring it to your needs
  • Speak to an independent critical illness insurance specialist* who can search critical illness quotes from across the market and provide quotes tailored to your specific needs meaning you get the very best policy for your money.
  • They guarantee to beat any quote and you'll qualify for up to £100 cashback if you take out a policy

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 and 30 days after they have been diagnosed with a critical illness 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 acting as sick pay. For more information see my article ‘What is the difference between income protection and critical illness insurance?

So is critical illness cover worth it?

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What is covered under a critical illness policy?

All critical illness insurance policies should cover the three core conditions as stated by the Association of British Insurers (ABI) and these are

  • Cancer
  • Heart attack
  • Stroke

Besides making up the core part of a critical illness insurance policy's cover, cancer, heart attacks and strokes are the conditions that make up the majority of claims against critical illness insurance. Arguably, these are also the kind of health conditions most of us fear getting, knowing that they can have a severely adverse effect on our lives – physically, emotionally and financially.

Although critical illness insurance won't take away the illness, a cash lump sum payout can mean that you're able to focus on treatment and recovery, using the money to cover any gap in your earnings or to pay for private medical treatment. You're not restricted in how you use your cash payout so you can use it as you see fit at the time.

The ABI lists the 3 core conditions along with a number of other medical conditions that should be covered by critical illness insurance which include:

  • Benign Brain Tumour
  • Blindness
  • Coma
  • Coronary artery by-pass
  • Deafness
  • Dementia
  • Loss of speech
  • Major organ transplant
  • Motor Neurone Disease (MND)
  • Multiple Sclerosis (MS)
  • Third degree burns
  • Total and permanent disability

The total and permanent disability cover ensures that despite what caused it, you can be paid out if you become completely disabled with no chance of recovery. Some insurers will charge extra to include this cover so you should check the terms of your critical illness cover.

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. For example, many types and stages of cancer are covered under a critical illness insurance policy but some early-stage cancers may be paid out as a partial claim where you receive a percentage of the full amount of cover while retaining the full cover should you go on to suffer a later stage cancer or indeed a different condition that is covered under full payments.

Importantly, for many years, insurance companies have competed based on the number of illnesses that are covered by their critical illness policies which led to some splitting covers in two 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 combined life insurance and critical illness insurance policies, the premiums would be cheaper than two separate policies as there is only ever one lump sum paid out by the insurance company.

Where a critical illness insurance policy includes life insurance, the policyholder will, more often than not, be covered for terminal illness as well. Terminal illness cover is usually included with life insurance, providing an early death payment if the insured person has less than 12 months to live but it shouldn't be confused with critical illness cover. You can read more in our article, “What is terminal illness benefit and is it the same as critical illness cover?“.

Critical illness cover is usually available for people between the ages of 17 and 70 who are UK residents.

Critical illness cover with a history of illness

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 were diagnosed
  • your current health

A specialist critical illness insurance adviser will be able to decipher which policies will be of the best value based on your health and help you find the most comprehensive cover. Read on to find out how to contact one. You can also read more about getting critical illness cover with a history of illness in our article, “Best critical illness insurance with pre-existing medical conditions“.

Why should I consider critical illness insurance?

Most people feel that life insurance will pay for the needs of their family if they 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 continue working, so critical illness insurance can help bridge the gap while you take time off work to recover. Those who do not have health insurance could also use the cash sum to pay for private medical treatment. A critical illness policy can also help you 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 income and state benefits 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 monthly 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 illness cover at a time when you are most likely to suffer.

How much does critical illness insurance cost?

Critical illness insurance can start at as little as £5 per month but can be around five times more expensive than life insurance because you are more likely to make a critical illness claim than you are, a death claim. It is important to consider the amount of critical illness cover you need separately to the amount of life insurance you need. You can select a smaller amount of critical illness insurance than the life cover amount you include in your policy in order to keep the overall cost down.

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
  • Participation in 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. 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 or disabilities.

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.

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 about your health and 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 monthly 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. The application will ask you about your occupation and pursuits and those who are at greater risk of injury due to these may not be offered total and permanent disability cover or the cover parameters can be restricted.

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 worth it. 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 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 critical illness insurance or any other personal insurance.
  • When considering critical illness cover always check the policy details carefully making sure you understand the illnesses and disabilities covered. Remember cheapest is not always best when it comes to critical illness insurance.
  • Check if an enhanced or upgraded version of the critical illness cover is available and how much this costs as it can create a more comprehensive cover.
  • Ensure you understand what constitutes a claim regarding both the seriousness of the illness and how it will be assessed.
  • Check what types of cancer are covered as some critical illness cover offer a wider range of cancers within the definitions of what they cover.
  • 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 as well as what age your children are covered from and until.

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 good insurance providers so you shouldn't worry about not being paid if you make a claim. However, you must be honest when you complete the health questionnaire and understand what you're covered for. The very small percentage of declined critical illness claims is largely due to policyholders claiming for health complaints that are not covered or because they have not been honest about their health when applying. Remember that the insurance provider will write to your doctor to get a full history of your health if you claim to check that your health questionnaire matches up to your medical records.

Insurer Critical Illness Claims Statistics – 2022

Insurance company Successful Claims
AIG 97.0%
Aviva 93.5%
Beagle Street Data not released
Guardian Data not released
Legal & General 93.4%
LV= 88.0%
Royal London 93.6%
Scottish Widows 93.3%
Vitality 92.5%
Zurich 91.0%

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 monthly premium. Always seek independent financial advice or use a specialist protection adviser and check the policy terms and conditions fully before purchasing.


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Leave a comment

  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