What is Critical Illness Cover?

Critical illness policies are designed to pay a lump sum on diagnosis of specified critical illness during the policy term. But it’s a little more complicated than that.

With Critical Illness Cover, its not uncommon to be confused about the cover you have, it often comes with specific exclusions, and it’s easy to think you’re protected when you’re not. Taking pains to check the terms of your policy when you’re setting it up can save you a lot of trouble later on.

Different illnesses may be covered by your policy. For example, a policy may only pay out depending on diagnosis of certain cancers, and stipulate on the severity of a heart attack.

Disclosing your medical history. You should provide your insurer with as much detail as possible about your medical history upon taking out a policy. If you are found to have omitted any details about your health, you may not be covered if you need to make a claim.

Your policy may have a survival clause. If you were to die within a few weeks* of your diagnosis, you may not receive any payment from your critical illness cover. This is because critical illness insurance is designed to pay out a lump sum to the policy holder to provide financial support whilst they recuperate from their illness.

*The actual length of the survival period may vary. Check the terms of your protection policy.

Do I Need Critical Illness Cover?

You may want to take out critical illness cover to give you a degree of financial security and help pay for the extra costs of recovery e.g. making changes to your home or car. Whether or not you need Critical Illness Cover will depend on your unique situation, but the following questions can help you consider how you these scenarios might affect you and your family:

  • Are you self-employed? How long would your savings last if you were unable to work? Are State benefits enough to replace your income?
  • Are you paying off a mortgage or any other debts?
  • How many dependants rely on you for living expenses?
  • If you were diagnosed with a Critical Illness, how would your dependants’ lives change?
A happy couple enjoying retirement

Not sure what protection you have in place, or whether Critical Illness Cover could be suitable for you?

Caught short without any insurance

When Briony sought advice from a Wren Sterling adviser, she had separated from her husband and he’d cancelled their life cover. Now that she was uninsured, Briony main concern was that she wanted to provide for her child if she were to die or become seriously ill and unable to work.

Assessing her circumstances, Wren Sterling recommended a policy with a guaranteed premium which provided life insurance (provides a lump sum upon her death) and critical illness cover (known as ‘CIC’ which provides a lump sum on diagnosis of a critical illness). The guaranteed premium means that the amount she will have to pay will remain the same – but that she will only be covered for a number of years.

A mother and daughter laughing together.

Do I need Critical Illness Cover for a Mortgage?

Critical Illness Cover may be recommended when taking out a mortgage. While you are not legally required to buy a policy, it may offer some peace of mind against the risk of being diagnosed with a serious illness (subject to any policy conditions) as there would be funds available to pay off the debt.

What about life insurance?

Critical Illness Cover is not suitable for everyone. It is not designed to pay out if you were to die due to an accident. However, if the policy holder’s death was caused by a critical illness, you’ll need to check the terms of your policy to see if the illness was included in the cover, and whether you are covered if there is a family history of this diagnosis.

Life insurance is designed to provide a lump sum in the event of your death. If you’re planning to take out Critical Illness Cover, it could be worth considering a Combined policy, which could offer you some of the benefits of both life insurance and critical illness cover and is often cheaper. With a Combined policy, you can often only claim once – so for example, if you were diagnosed with cancer and the policy paid out, there may be no life insurance payout from this policy in future. Combined cover may not be the right choice for you, which is why talking to a financial adviser can help you understand your current policies, and what you may need extra cover.

Taking your concerns and wishes into account is just one way a financial adviser supports their clients when setting up protection policies. Financial advice isn’t about just finding the cheapest option available – advisers take the time to understand the complexities of your situation and find the most suitable policies and products for you.

Please note, all names in this case study have been changed to protect the privacy of individuals.

Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

According to Legal and General, 91.7% of claims paid out. The five most common conditions claimed for and paid were for: