Critical illness cover, also known as critical illness insurance, is a long-term insurance policy which covers serious illnesses listed within a policy. If you get one of these illnesses, a critical illness policy will pay out a tax-free, one-off payment. This can help pay for your mortgage, rent, debts, or alterations to your home, such as wheelchair access, should you need it.
- What is critical illness cover?
- Do you need critical illness cover?
- How much does it cost?
- Other types of insurance you might need
What is critical illness cover?
Critical illness insurance will pay out if you get one of the specific medical conditions or injuries listed in the policy.
But be aware that not all conditions are covered and policy will also state how serious the condition must be.
Don’t confuse critical illness cover with life insurance, although they are sometimes sold together.
Every year, 1m workers in the UK unexpectedly find themselves unable to work because of injury or illness, according to the ABI (2015).
Examples of critical illnesses that might be covered include:
- heart attack
- certain types and stages of cancer
- conditions such as multiple sclerosis.
Most policies will also consider permanent disabilities as a result of injury or illness.
It only pays out once and then the policy ends.
Some policies will make a smaller payment for less severe conditions, or if one of your children has one of the specified conditions.
What isn’t covered?
Not sure what something means? Have a look at our Protection insurance glossary.
Some serious illnesses might not be covered, for example, some cancers and conditions not listed in the policy.
You probably won’t be covered for health problems you knew you had before you took out the insurance, and this type of insurance doesn’t pay out if you die.
What’s covered and what’s not, will be set out in the policy details so make sure you’re fully aware of them and that they cover your needs.
Do you need critical illness cover?
State benefits might not be enough to replace your income if something goes wrong and you can’t work because of long-term sickness or disability.
If you’re eligible, Employment and Support Allowance ranges from around £70 to just over £100 a week, depending on your circumstances and the seriousness of your illness or disability.
You should look at getting critical illness cover if:
- you don’t have enough savings to tide you over if you become seriously ill or disabled
- you don’t have an employee benefits package to cover a longer time off work due to sickness.
Who doesn’t need it?
You might not need it if:
- you have enough savings to fall back on and can cover expenses such as bills, loans, medical costs or a mortgage
- you have a partner who can cover living costs and any shared commitments, such as a mortgage
- you already have some cover included in as part of your employer’s employee benefits scheme.
How much does it cost?
Your monthly payments will depend on a number of factors, including:
- the amount of cover you take out
- whether you smoke or have previously smoked
- health (your current health, your weight, your family medical history)
- job (some occupations carry a higher risk than others and might mean you have to pay more each month.
Other types of insurance you might need
Have you thought about how your dependants might cope financially if you died unexpectedly?
Or what you would do if you fell ill and found yourself unable to work?
There are a number of insurance products which can provide you with peace of mind should something go wrong.
You can find out more in the links below:
- Do you need life insurance? This product will provide some financial support to your dependants if you die.
- Do you need income protection insurance? This type of insurance provides regular payments if you’re unable to work due to illness or injury.
- Do you need payment protection insurance? Also known as PPI, this product 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? This solution provides short term cover to help you pay for essential outgoings if you find yourself unable to 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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