Critical illness insurance – choose the right policy

Money Advice Service

It’s important to compare critical illness policies before you buy. There are important differences between policies, so choose wisely. Consider using an independent financial adviser to help you make the right decision.

Critical illness options

Not sure what something means? Have a look at our Protection insurance glossary.

Just critical illness insurance

A standalone critical illness insurance policy will pay out a lump sum if you get a serious illness listed in the policy.

Critical illness insurance is often bought with life insurance.

This policy would then pay out if you were diagnosed with a critical illness, and you would still have life cover.

Having both will provide the reassurance that you’ll be taken care of if you fall seriously ill, but also that your dependants will be looked after if you die unexpectedly.

Pros: generally more affordable

Cons: works best with life insurance so your monthly payments will be higher than one policy alone

Combined life insurance and critical illness cover

This type of insurance pays out a lump sum if you die or if you get a critical illness. You’ll usually get one payout, so if you claim for critical illness your life insurance cover will end.

Pros: A more affordable alternative to getting two separate polices

Cons: you’ll only get one payout

As part of a mortgage protection (decreasing term) life insurance policy

Lots of people first consider critical illness cover when taking out a mortgage.

With this type of product, you get enough life insurance and critical illness insurance to cover your mortgage.

If you have a repayment mortgage then you can choose to get insurance which automatically decreases like your outstanding mortgage debt.

Pros: your mortgage is paid off in full if you die or are diagnosed with a critical illness

Cons: pays out for death or critical illness, but there’s only one payout

Do you need life insurance?

What’s the difference between a fixed and a reviewable policy?

Some policies give you the option to pay the same amount every month while you keep the policy (this is known as a fixed, or guaranteed, premium). While this can be more expensive in the short-term, many people like the security of knowing what they’ll be paying in future.

Alternatively you might think about monthly payments that can be reviewed after a period of time – known as reviewable premiums – where rates are typically looked at every five years.

The initial cost tends to be lower, but it can rise over time and is influenced by:

  • your age
  • medical advances.

What illnesses are covered?

All critical illness policies cover heart attack, stroke and cancer, provided they are of a certain level of severity.

Cover for other conditions varies depending on the policy, and you’ll need to check to see what’s included. You’ll also need to look at how severe a condition would have to be before you to get a payout.

Illnesses that are excluded

Some serious conditions might not be covered by a critical illness policy.

Examples include:

  • some cancers
  • some critical injuries, such as broken bones
  • health problems you knew you had before you took out the insurance.

Policies often give a description of how severe an illness needs to be before the insurer will pay out.

For some procedures covered under the policy – for example heart valve replacement– the type of surgery you have also makes a difference.

Non-invasive cancers are often excluded from cover.

One reason given for this by the Association of British Insurers is that these types of cancers have “an excellent cure rate”.

Of course, treatment for non-invasive cancer can still take weeks or months, and it would not always be possible to work during this time.

Some insurers now pay partial benefits for less severe conditions.

For example, many make a payment for mastectomy or lumpectomy and some cover low grade prostate cancer.

What do I need to think about?

There are many things to consider when getting critical illness cover.

For example, how would you replace your income if you became unable to work?

Would you be able to pay to make your home wheelchair accessible if you needed to? How would you cover your mortgage or rent?

How much cover you need depends on your personal circumstances. Think about getting expert independent advice to make sure you get the right type of cover.

You can find an independent financial adviser using the links below.

Use our FAQ guide, which covers the basic questions that you might want to ask an adviser, or the questions they will ask you.

Ready to look at policies?

Other types of insurance you might need

A variety of products are available to help you protect what’s most important to you. You can find out more in the links below.

Do you need life insurance? This type of insurance will provide some financial support to your dependants if you die.

Do you need income protection insurance? This type of product provides regular payments if you’re unable to work due to illness or injury.

Do you need payment protection insurance? This type of insurance will help you keep making payments if you can’t work due to an illness, injury or if you’re made redundant.

Do you need short term income protection? Provides short term cover to pay for essential outgoings if you can’t work.

Read our at-a-glance guide to find out more about the differences between protection products

This article is provided by the Money Advice Service.

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