Critical illness cover can pay a lump sum if you are diagnosed with a serious illness covered by your policy.
The money could help with your mortgage, household bills or changes you need to make because of your illness. However, not every serious illness is covered, so the policy details matter.
How Does It Work?
You pay for the insurance, usually each month. If you are diagnosed with a condition covered by the policy and meet its definition, you can make a claim.
If the claim is accepted, the insurer normally pays a lump sum. You can then use the money as you choose.
The policy may end after a full payout, depending on its terms.
Do You Need It?
Think about what would happen financially if you became seriously ill.
You may be unable to work for some time, while your household costs continue. You could also face new expenses because of your illness.
Critical illness cover may be worth considering if your savings and other protection would not be enough.
Before buying it, check what help you already have through work, savings or existing insurance.
What Could the Money Cover?
There are normally no rules about how you spend a full critical illness payout once a valid claim has been paid.
For example, you could use it to:
- repay some or all of your mortgage
- cover household bills
- repay debts
- replace some lost income
- adapt your home
- pay for additional care or support
So, start by thinking about the financial effect a serious illness could have on your household.
Which Illnesses Are Covered?
This is one of the most important things to check.
Policies cover a list of specified illnesses and medical conditions. These can include some cancers, heart attacks and strokes, but the exact cover varies between policies.
An illness appearing on the list does not always mean every diagnosis of that illness will result in a payout.
The diagnosis must meet the definition in your policy.
Why Do Definitions Matter?
Two policies can both say they cover the same illness but use different definitions.
For example, a policy may require a condition to reach a certain level of severity before it qualifies for a full payout.
Therefore, do not compare policies simply by counting how many conditions they list.
The quality and scope of the cover matter too.
How Much Cover?
There is no single amount that suits everyone.
Think about what you would want the money to achieve. For example, you may want to reduce your mortgage, cover essential bills or give yourself some financial breathing space while you recover.
Then consider your savings, sick pay and any other insurance.
This can help you work out the financial gap you want to protect.
How Long Should Cover Last?
You normally choose how long you want the policy to run.
You might want cover until your mortgage is repaid, your children become independent or you reach a certain age.
A longer term can cost more, so choose a period that matches the need you are trying to protect.
What Affects the Price?
The price depends on the cover you choose and the risk to the insurer.
Factors can include:
- your age
- your health and medical history
- whether you smoke
- the amount of cover
- how long the policy lasts
- other personal risk factors
Different insurers can assess these factors differently.
Give Accurate Information
Answer questions about your health and circumstances carefully.
The insurer uses this information to decide whether it can cover you and on what terms.
If important information is incorrect or missing, it could affect a future claim.
What About Existing Conditions?
A previous or existing medical condition can affect the cover available.
Depending on the circumstances, an insurer may charge more, apply an exclusion or decide that it cannot offer cover.
This varies between insurers and individuals, so check any exclusions carefully before accepting a policy.
Children’s Cover
Some policies include or offer critical illness cover for children.
The amount paid and conditions covered may be different from the main policyholder’s cover.
If children’s cover matters to you, check what is included rather than assuming it comes as standard.
Partial Payments
Some policies can make a smaller payment for certain conditions that do not qualify for the main payout.
These are sometimes described as additional or partial payments.
Again, the details vary. Check how much could be paid and whether making a smaller claim affects the remaining cover.
Critical Illness or Life Insurance?
The two types of insurance protect against different events.
Life insurance mainly pays if you die while covered.
Critical illness cover can pay while you are alive if you develop a covered condition and meet the policy definition.
The two are sometimes sold together, but they are not the same protection.
Critical Illness or Income Protection?
There is also an important difference between critical illness cover and income protection.
Critical illness cover normally provides a lump sum after a qualifying diagnosis.
Income protection can provide regular payments when illness or injury stops you working and you meet the policy terms.
For example, you could be unable to work because of an illness that does not qualify for a critical illness payout.
So, ask yourself what you are trying to protect: a serious diagnosis or your ability to earn an income?
Combined Policies
Life insurance and critical illness cover can sometimes be bought together.
However, check what happens after a claim. Some combined policies may end after a successful critical illness payout, meaning there is no later life insurance payout from that cover.
Other arrangements can work differently.
Make sure you understand what remains after a claim before choosing a combined policy.
Compare More Than Price
A cheaper policy is not necessarily better value.
When comparing cover, look at:
- which conditions are covered
- how those conditions are defined
- exclusions
- amount of cover
- length of cover
- partial payments
- children’s cover, if needed
- what happens after a claim
The aim is to understand what you are buying before you need to use it.
Review Your Cover
Your financial needs can change.
Buying a home, having children, changing your mortgage or taking on other commitments may affect the amount of protection you want.
Review your cover after major changes.
However, think carefully before cancelling an existing policy. Your age or health may make replacement cover more expensive or harder to obtain.
Before You Buy
First, think about how a serious illness could affect your finances. Then check your savings, sick pay and any cover you already have.
Next, decide what you would want a payout to achieve and how long you need protection.
Finally, compare the details of suitable policies rather than focusing only on the price or number of illnesses listed.
The key question is not “How many illnesses does it cover?”
It is “When would this policy actually pay?”
Key Points
- Critical illness cover normally pays a lump sum after a qualifying diagnosis.
- Only illnesses and conditions covered by the policy can qualify.
- The policy definition of an illness is important.
- Check your savings, sick pay and existing insurance first.
- Critical illness cover is different from life insurance and income protection.
- Compare the cover and exclusions, not just the price.
- Review your protection when your circumstances change.
Important Information
Energility provides general information to help you understand energy, household and business costs, services and ways to save money. Our content is for general information only and is not financial, legal, tax, technical or other professional advice.
Information about financial products, including mortgages, loans and insurance, is also provided for general information and comparison purposes. Energility does not provide personalised financial advice. Whether a product is suitable or available to you will depend on your circumstances, the provider’s terms and any eligibility or affordability checks that apply.
Prices, tariffs, interest rates, fees, insurance premiums, grants, government schemes, regulations and other information can change. Any costs, savings, repayments, premiums, quotations or calculator results shown by Energility are estimates unless clearly stated otherwise. Your actual costs and results may be different.
Before making an important financial decision, taking out a financial product, signing a contract or carrying out significant work, check the latest information and the provider’s full terms. Where appropriate, consider getting advice from a suitably qualified professional.
Energility may receive a commission, referral fee or other benefit from some links, products or services. Where this applies, we aim to make it clear. This does not increase the price you pay unless stated otherwise.
Energility
Learn More. Spend Less.