In this article, we will explain how critical illness premiums are calculated and what your critical illness policy should cost. We'll also explain how to buy the best and cheapest critical illness cover and receive up to £100 cashback when you do so.
Which factors affect the cost of critical illness insurance?
Your risk profile is the calculated likelihood that you will be diagnosed with a critical illness and make a claim. Here are some of the factors that affect risk profile and in turn affect how much critical illness cover will cost.
Age
Your age when you apply for critical illness insurance affects how much you pay. Perhaps even more importantly, your age when the policy will expire will also determine how much you pay for your policy.
Although a serious illness can strike at any age, the risk increases as we reach our later years. Long-term protection against this risk costs more so if your policy is due to expire when you are 60, this will cost less than if your policy were to expire at age 70.
Smoker status
Smoking almost doubles the cost of your critical illness insurance cover as the risk of heart disease, cancer and other illnesses that are covered by the policy is greater for smokers.
If you give up smoking, you can ask your insurer to review your monthly premium and change it so that it is the same rate as a non-smoker. Usually, you will have to confirm that you have used no nicotine or tobacco products for at least 12 months and you may be invited to complete a cotinine test to verify that you are not smoking.
If your insurance provider is unable to review your smoker status, you can replace your policy with a new one but remember that any change in your health may affect a new application and any age increase will also be reflected in your monthly premium.
Medical history
When you buy insurance against serious illnesses such as cancers, heart attacks and strokes the insurance company will ask you about your current and past health. Understandably, if you have a pre-existing health condition at the time of your application, this may increase the cost of critical illness insurance for you.
Any health issues that arise after you start critical illness insurance cover will not affect your cover and you do not need to make the insurance company aware but you should be careful not to let your policy lapse as a new application may be affected by new health disclosures.
Health is a complex area and even with the same medical diagnosis, two people may have very different risk profiles. If you have recovered well or if your existing medical condition is well-managed and controlled, the cost of your critical illness insurance should be less. The price is likely to be more for those with health conditions that are not well-controlled or have been recently diagnosed.
If your critical illness insurance premium was increased due to your health when you started it but your health has since improved, you should review your policy. You may find that you can reduce your monthly premium if this is the case. Do not cancel your existing insurance until you have sourced, applied for and received acceptance terms for new insurance.
If the cost of your critical illness insurance has been increased because of your medical condition, it is extremely helpful to speak to a specialist adviser*. Specialist critical illness insurance advisers have access to all the insurance companies. They also have an in-depth knowledge of how each insurance company assesses different health conditions. They don't all use the same guidelines and you may find that your health increases your monthly premium with one insurer while another is willing to accept your application at no cost increase.
Family medical history
If a member of your immediate biological family has suffered a serious illness, you may be asked to disclose this. Do remember that you can only be expected to disclose what you know so don't worry if you have no knowledge of this. You simply need to answer the questions to the best of your knowledge.
Adverse family medical history can increase the cost of your critical illness insurance. The age of the family member when they were diagnosed as well as your age when you apply are determining factors. Ensure that any disclosure you make is accurate to ensure your application is assessed fairly.
Occupation & Lifestyle
What you do for a living as well as your hobbies and pursuits gives some indication of your risk of injury or even permanent disability. Most critical illness insurance policies provide cover against total and permanent disability. If your job or lifestyle puts you at a greater risk of claiming this benefit, the insurance company can do one of two things. The insurer will either decline the total and permanent disability benefit or the benefit will be adapted so that the criteria for a claim is more difficult.
Again, insurance companies assess your occupation and lifestyle using different guidelines and you should speak to a specialist adviser to ensure that you select the most favourable insurer for your personal circumstances.
It can be invaluable to speak with a specialist critical illness insurance adviser*. They can assist in finding the best-priced policies and provide guidance on how to build your insurance so that it gives you peace of mind at an affordable monthly premium.
What other factors affect the cost of critical illness cover?
Some of the choices that you make when buying your critical illness insurance will directly affect how much it costs. Understanding these will assist in arranging the lowest-cost insurance. Like most health insurance products, critical illness insurance will assess the likelihood of a claim by gathering present and past information about you so the cost reflects your personal circumstances.
Amount of critical illness cover
The sum assured is the tax-free, cash lump sum amount the policy will pay out in the event of a claim. The greater the level of cover, the more the policy will cost. This is usually the main focus of adjusting your critical illness insurance to suit what you want to pay. Although it is usually best to buy as much cover as you need, do remember that you can build on your insurance as long as your health does not deteriorate.
Critical illness cover term
The term is the number of years that the critical illness insurance policy provides cover for. The longer you wish to be covered, the more it will cost. Buying critical illness insurance for a shorter term on the premise that you will buy more later is usually more expensive in the long run, so finding a balance for the policy term is important.
Type of critical illness cover
Critical illness insurance is usually combined with life insurance as removing life insurance doesn't really change the cost of it. However, the type of critical illness cover you choose will affect the cost of your policy. Decreasing critical illness insurance can be ideal to protect a repayment mortgage as the amount of cover will reduce as the mortgage balance reduces. This is one of the cheapest types of critical illness insurance but may not suit you if you require the amount of cover to remain level. Level critical illness insurance costs more because it pays the same amount whether a claim is made at the beginning or end of the policy term.
Standalone critical illness cover or Life with critical illness cover
It is important to note that you should almost always buy life insurance with critical illness cover instead of buying standalone critical illness cover as the difference in cost is almost negligible. You have to survive for a prescribed number of days after you are diagnosed with a critical illness in order for a claim to be paid and if you die within this period of time, the policy will only pay out if your cover includes life insurance.
Quality of critical illness cover
No two critical illness policies are the same so the quality of the cover will affect how much critical illness cover costs.
Some policies will cover a much wider range of illnesses and give the policyholder more opportunities to claim. If you suffer an illness but it doesn't meet the severity described in the full payment conditions, your policy can provide you with a partial payment without affecting your full cover. This benefit isn't included by all insurers and you may be covered for a larger number of partial payment conditions with one insurer over another.
Choosing a basic product can cost less and there are some no-frills policies available in the market that cover you for cancer, heart attacks and strokes only. These no-frills critical illness insurance policies still cover the illnesses that make up the majority of critical illness claims made each year but won't provide a payout for the numerous other medical conditions that are covered by more comprehensive policies. It is wise to weigh up benefits versus costs to check that the cost saving is worth it.
Single or joint critical illness cover
It may cost the same or fractionally more to buy two single policies if you are buying your critical illness insurance cover with your partner but it doubles the potential payout. A joint critical illness insurance policy only pays out once for the person who claims first. It will then lapse leaving the other person with no cover. Buying your critical illness cover separately means that you can both claim independently and if you have children, they are covered twice.
Guaranteed or reviewable premiums
The type of premium you choose has an impact on the long-term cost of your critical illness insurance. You can choose guaranteed or reviewable premiums. Guaranteed premiums are usually higher to start with but are fixed for the duration of your policy. Reviewable premiums are usually cheaper but can increase at each review date making them more expensive over time.
How much does critical illness insurance cost?
There are different ways to arrange your critical illness insurance depending on your personal circumstances. As we pointed out earlier, it is cost-effective and useful to combine life insurance and critical illness insurance. Personal insurance can and should be tailored to meet your financial commitments if you become seriously ill at a cost that suits your budget. If you speak to a specialist adviser, they'll play around with different amounts and compare costs until you are happy that you have a balance of good insurance at a reasonable price.
Below, we'll demonstrate the cost of:
- £200,000 life with £100,000 of critical illness insurance - this policy will pay out £100,000 upon diagnosis of a serious illness leaving £100,000 of life insurance that could pay out if death occurs after the first claim. If there was never a claim for critical illness but death occurred, £200,000 would pay out.
- £200,000 life and critical illness insurance - this policy will pay out £200,000 for whichever event happens first - be that death or diagnosis of a serious illness and the policy ends after one claim
Cost of £200,000 level term life with £100,000 critical illness insurance over 20 years for a non-smoker
| Age | Monthly premium for £200,000 life with £100,000 critical illness insurance* |
| 20 | £17.23 |
| 30 | £27.42 |
| 40 | £54.11 |
*all premiums are guaranteed to remain the same for 20 years and assume the applicant is in good health and without any adverse risks
Cost of £200,000 level term life and critical illness insurance over 20 years for a non-smoker
| Age | Monthly premium for £200,000 life and critical illness insurance* |
| 20 | £26.37 |
| 30 | £47.47 |
| 40 | £96.90 |
*all premiums are guaranteed to remain the same for 20 years and assume the applicant is in good health and without any adverse risks
Cost of £200,000 level term life with £100,000 critical illness insurance over 20 years for a smoker
| Age | Monthly premium for £200,000 life with £100,000 critical illness insurance* |
| 20 | £20.99 |
| 30 | £37.16 |
| 40 | £91.06 |
*all premiums are guaranteed to remain the same for 20 years and assume the applicant is in good health and without any adverse risks
Cost of £200,000 level term life and critical illness insurance over 20 years for a smoker
| Age | Monthly premium for £200,000 life and critical illness insurance* |
| 20 | £31.62 |
| 30 | £65.70 |
| 40 | £140.08 |
*all premiums are guaranteed to remain the same for 20 years and assume the applicant is in good health and without any adverse risks
What is the average cost of critical illness insurance?
As we've explained earlier in this article, the cost of critical illness insurance is worked out by assessing the likelihood of the policyholder making a claim. For this reason, there is no average cost, as people are different and their circumstances will determine how much they pay for critical illness insurance. As a rough guide, non-smokers under the age of 40 should expect to pay somewhere between £15 and £50 per £100,000 of critical illness cover. Those who smoke are likely to pay 40% to 100% more than a non-smoker.
How to work out how much critical illness cover will cost you
Whether you already have critical illness insurance or you are looking to buy it, you'll probably find that it isn't the simplest of products to understand or tailor to what you need. The parameters of critical illness cover have a large effect on how much it costs and you will end up paying higher premiums than you may need to if you do not choose your critical illness cover carefully.
Comparison sites can oversimplify the policies in order to keep the online journey short for their customers. This can make policies seem comparable even when there are significant differences between what you can claim on each policy. You may not spot the advantage of paying a pound or so more to gain some really useful benefits.
You should be careful not to confuse terminal illness cover with critical illness cover as terminal illness cover is usually included with your life insurance at no extra cost. Terminal illness cover pays your death benefit early if
The best way to check how much critical illness should cost is to speak to a specialist critical illness insurance adviser* who provides policies from all insurers. This way you will receive an unbiased recommendation.
The advisers can even compare the critical illness insurance with other types of illness insurance such as income protection insurance which may be cheaper and better suited to your needs taking into account state benefits, sick pay and your savings to create a more bespoke insurance that provides long-term peace of mind. If you are unable to work due to an illness or injury that is not covered by a critical illness policy, an income protection policy could still provide cover as it does not rely on specific diagnoses.
A specialist critical illness insurance adviser will consider all your personal information alongside what you want to achieve. This allows them to select the cover that is suited to you personally. It is helpful to suggest a budget for your insurance so that the adviser can work within the limits of what you want to spend.
We have vetted the advice and service provided by the advisers and found it was thorough whilst simple. They will even help you to put your policy in a trust. A trust is a legal document that allows you to retain any critical illness claim for yourself while nominating your chosen beneficiary in case you die and the life insurance part of the insurance pays out.
Receiving critical illness insurance advice is completely free and as a Money to the Masses reader, you'll even receive up to £100 cashback when you buy your critical illness insurance this way.
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. This 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
