Critical illness insurance

As a member of the Armed Forces you may be covered in the event of injury or illness. If you have reached a pensionable point, you will receive a pension, otherwise you will only receive a pension or payout if your illness or injury is attributable to your Service.

Critical illness insurance is a long-term insurance policy where you'll get a tax-free lump sum if you're diagnosed with a serious illness covered by the policy.

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 the 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.

Examples of critical illnesses that might be covered include:

  • Heart attack
  • Stroke 
  • 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

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 does not 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.

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Do you need it?

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 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 

Choosing the right policy

It's important to compare critical illness policies before you buy. This type of insurance can be expensive and there are important differences between policies, so choose wisely. Consider using an independent financial adviser to help you make the right decision.

Types of critical illness cover   How this type of cover works 
Just critical illness insurance A standalone critical illness insurance policy could work for you if you already have 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 will be taken care of if you fall seriously ill, but also that your dependants will be looked after if you die unexpectedly.
Combined life insurance and critical illness cover This type of cover generally 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 the life insurance cover will end.
Critical illness cover within a decreasing term (mortgage protection) life insurance policy Lots of people first consider critical illness cover when taking out a mortgage. With this type of insurance, you have enough life insurance and critical illness insurance to cover your mortgage. If you have a repayment mortgage then you can have insurance which automatically decreases in line with your outstanding mortgage debt. This type of policy pays out for either death or critical illness, but there’s only one payout.

How much does it cost?

Your monthly payments will depend on a number of factors, including: 
  • age
  • 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 may mean you have to pay more each month).
  • the amount of cover you take out

Fixed or reviewable?

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 reconsidered every five years. The initial cost tends to be lower, but it can rise over time and is influenced by:

  • your age
  • medical advances

How much cover do you need?

A lot of people buy enough cover to pay off the mortgage in case of critical illness, and link the length of their policy to the length of their mortgage.

You may also want to cover the cost of modifications to your home such as wheelchair access. You should also consider how you would replace income if you could not work. How much cover you need depends on your financial circumstances and how much you can afford.

It's probably a good idea to get expert independent advice - see Buying critical illness insurance, below.

did you know?

The younger you are when you start a critical illness policy, the cheaper it's likely to be.

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Buying critical illness insurance

Where to get quotes 

Because the cost of getting it wrong is so high, it's best to buy using an independent financial adviser or someone from the SIIAP accredited companies or the White Ensign Association directory who specialise in this type of insurance.

They'll be able to advise you on whether a critical illness policy really is right for your needs and if so, how much cover you need and for how long. They might charge a fee for their services – or they may be paid in commission by insurance companies.

Money fitness tip

Use our Buying insurance checklist. It sets out what you need to think about to get the right policy for you.

Be honest about your medical history

If you ever do need to make a claim, insurance companies will look carefully at your application form before they agree to pay out. If you didn’t take reasonable care to answer truthfully or accurately on your original application or didn't disclose everything the insurers asked you for, the chances are they'll find out and refuse to pay your claim.

Read the application form carefully and give all the information you can. Then keep a copy of your application so you can refer to it later. If you later notice that you didn’t answer a question correctly, get in touch as soon as possible to let them know.

Being honest may result in higher premiums, but if you're not honest with the insurer you might end up paying for a policy that will never pay out because you're not eligible for cover. 

Read the small print

Read the small print before you take out the policy so that you know what you're buying. Make sure you know exactly what is and isn't covered. If you see something you don't understand, ask the insurance provider or your adviser or broker.

What is excluded (not covered) can vary by insurer. When comparing offers, read these definitions so you can be sure you're comparing similar policies. 

Changing your mind

If you buy a policy and then change your mind, you have 30 days to apply for a full refund. 

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Other insurance you might need as well as, or instead of, critical illness

If you have dependants – like children, or a partner – then life insurance will most likely be more important than critical illness insurance. But life insurance only pays out if you die (or are diagnosed with a terminal illness).

You also need to think about how you would get by if you suffered an illness not covered by a critical illness policy and couldn’t work. In these circumstances income protection insurance may be more suitable and a cheaper option - see Income protection insurance.

Making a claim

If you need to make a claim on your policy, see Making a claim.

Last reviewed: 04/04/2018