Critical illness cover is a type of protection insurance that can provide a financial safety net if you’re diagnosed with a serious illness covered by your policy. The lump sum payment could help with mortgage payments, childcare, loss of income or other costs while you focus on your treatment and recovery.
What does critical illness cover?
Critical illness cover is an insurance policy that can provide a one-off lump sum if you’re diagnosed with a critical illness that’s covered by the terms of your policy.
The money can generally be used however you need it. For example, you could use it to help with:
Mortgage or rent payments
Household bills
Replacing lost income
Childcare costs
Medical or extra living expenses
Changes or adaptations to your home, like wheelchair access
The purpose of critical illness cover is to provide financial support at a time when you might be unable to work, or have additional costs to deal with.
As with any insurance policy, the conditions covered and the circumstances in which a claim can be made will depend on the policy you choose. That’s why it’s important to check the terms and conditions carefully.
Mortgage or Rent Payments
Household Bills
Replacing Lost Income
Childcare Costs
Medical or Extra Living Expenses
Wheelchair Access
What critical illnesses are covered?
A critical illness is generally a serious medical condition that can have a debilitating impact on someone’s health and quality of life.
Depending on the policy, the list of critical illnesses can include conditions like:
Cancer
Heart attack
Stroke
Organ failure
Paralysis
Loss of limbs
Terminal illness may be included as part of your policy but it’s separate from the critical illnesses covered above. It typically pays out if you’re diagnosed with a terminal illness and have a life expectancy of less than 12 months.
It’s important to remember that not every policy covers the same illnesses and the definition of a condition can vary between providers.
If you’re considering critical illness insurance, make sure you understand which conditions are covered and what your policy requires before a claim can be paid.
What affects the cost of critical illness cover?
The cost of critical illness cover can vary depending on your policy. Insurers will typically consider factors such as:
Your age – premiums can be higher as you get older.
Whether you smoke – smoking can affect the cost of your cover.
Your health – your current health, weight and medical history might be considered.
Your family medical history – certain hereditary conditions could affect your premium or cover available.
Your occupation – some jobs might be considered higher risk.
The level of cover – the amount you choose to protect can affect your premium.
If you’re considered to be at a higher risk of a particular condition, it may be excluded from your policy or you could have to pay a higher premium.
Your age
Premiums can be higher as you get older.
Whether you smoke
Smoking can affect the cost of your cover
Your health
Your current health, weight and medical history might be considered.
Your family medical history
Certain hereditary conditions could affect your premium or cover available.
Your occupation
Some jobs might be considered higher risk.
Level of Cover
The amount you choose to protect can affect your premium.
Do I need critical illness cover?
Whether critical illness cover is right for you will depend on your circumstances and how your finances would cope if you were unable to work because of a serious illness.
It can be worth considering if you:
Have a mortgage or other significant financial commitments.
Have children or other dependants who rely on your income.
Are self-employed and wouldn’t receive an income if you couldn’t work.
Have limited savings to fall back on.
Would struggle to pay your household bills without your income.
Would need to make changes to your home following an illness or injury.
A useful way to think about it is to ask yourself, what would happen to my finances if I became seriously ill and couldn’t work?
Would your savings cover your mortgage payments? Could your family manage if your income stopped for several months? Could you afford extra costs to pay for your recovery?
If the answer to these questions is no, it may be worth considering whether critical illness cover could provide a financial safety net.
Whether critical illness cover is right for you will depend on your circumstances and how your finances would cope if you were unable to work because of a serious illness.
When should I take out critical illness cover?
There’s no single right time to take out critical illness cover, however it’s often worth thinking about when you apply for a mortgage or are looking to remortgage.
A mortgage is a long-term financial commitment, so you need to think about how you’d continue making your payments if you were diagnosed with a critical illness.
It’s also important to remember that your circumstances can change over time. A policy that was right when you first took it out, might not give you the level of protection you need today.
Emma and Tom’s critical illness experience
Mab customers Emma and Tom know this all too well. When Tom was diagnosed with cancer, their critical illness cover helped provide financial support at a time when their family needed it most.
“We always thought things like that only happen to someone else…”
Emma and Tom were looking forward to the birth of their second son when tragedy struck their family.
The couple, who live on the Wirral with their two young sons, were facing an incredibly difficult situation. Emma was about to go on maternity leave, while Tom was self-employed and unable to earn if he couldn’t work.
With their income under pressure and a mortgage to pay, they were concerned about how they would cope financially while Tom underwent treatment.
“The moment Tom got his diagnosis, the world seemed to stop.”
Tom had originally visited his GP about an ongoing problem with his leg. He was referred to hospital for further investigation and was diagnosed with a malignant tumour in his thigh.
The diagnosis came just before Christmas, when Emma was six months pregnant.
“Because of the Christmas holidays, we had to wait two weeks or so before Tom could be admitted to hospital for further investigation, so our lives were on hold. Christmas was surreal; we tried to make it as normal as we could for Alfie, and to keep as calm as possible.”
As well as dealing with the emotional impact of Tom’s diagnosis, the couple had to think about what would happen to them financially.
Fortunately, Tom had taken out critical illness cover a few years earlier.
The couple were able to make a claim on the policy, giving Tom the financial support he needed while he underwent surgery and rehabilitation. It also meant Emma didn’t have to return to work straight away following the birth of their second son.
Fortunately, Tom responded well to treatment and eventually made a full recovery. The lump sum gave the family greater financial flexibility for the future, helping them move to a bigger family home and make plans for their wedding.
For Emma, the experience changed the way they thought about critical illness cover.
“It made us realise that you hear of these sorts of things happening, but when you do, you always assume it ‘will only happen to someone else’. In our case, we became the ‘someone else’.”
“It made us realise that you hear of these sorts of things happening, but when you do, you always assume it ‘will only happen to someone else’. In our case, we became the ‘someone else’.”
Speak to a protection adviser
No insurance policy can take away the emotional impact of a serious illness, but having the right protection in place can reduce some of the financial pressure.
Most importantly, it offers peace of mind, allowing you and your family to focus on what matters most. If you’re considering taking out critical illness cover or want to discuss your protection needs, speak to one of our advisers who can help you understand your options.
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Frequently asked questions
The main difference between critical illness cover and life insurance is how and when the lump sum payment is provided to you. Critical illness cover most commonly pays out a lump sum following diagnosis of a health condition defined within the terms of the policy. Life insurance pays out if you were to die during the term of the policy.
Financial risk is how likely you are to experience financial setbacks due to unforeseen factors, such as death, critical illness, disability and job loss.
Financial risk can be caused by a variety of circumstances. Some of these factors are in your control, like your level of spending and lack of insurance, whereas others are external, such as the economic climate and health issues.
By taking out protection policies, you can minimise the impact of financial risks. This can be income protection or other forms of insurance and also by having a healthy emergency fund, in case you face any financial risks that aren’t covered by your insurance.
Income protection offers financial support if you’re unable to work due to illness or injury. It replaces part of your income and will continue to pay out regular, tax-free instalments until you’re able to return to work.
Financial stability means you have enough income to cover your expenses and have a buffer for emergencies (protection policies and savings). Our Financial Risk Assessment can help you assess your current situation and inform you if any improvements could be made.
Unpredictable events can hurt your finances. Take a free Financial Risk Assessment to identify your vulnerabilities and explore protection options that plug the gaps, giving you peace of mind.