Critical illness insurance pays you a tax-free lump sum if you’re diagnosed with one of the specified serious illnesses. It’s designed to cover your mortgage, living expenses, or medical costs while you recover.
Common Conditions Covered
| Condition | Typical Payout |
|---|---|
| Cancer | Full sum assured |
| Heart attack | Full sum assured |
| Stroke | Full sum assured |
| Multiple sclerosis | Full sum assured |
| Parkinson’s disease | Full sum assured |
| Kidney failure | Full sum assured |
| Coronary bypass | 25–100% of sum |
Most policies cover 30–40 conditions, but some cover 100+. Always check the specific list.
How Much Cover Do You Need?
Calculate: Outstanding mortgage + 3–5 years of living expenses + any debts
| Scenario | Recommended Cover |
|---|---|
| Single, renting | £50,000–100,000 |
| Couple, mortgage | £200,000–400,000 |
| Family, mortgage | £300,000–500,000 |
| Higher earner | £500,000+ |
Critical Illness vs Life Insurance
| Feature | Critical Illness | Life Insurance |
|---|---|---|
| Pays out | When you’re diagnosed | When you die |
| When you need it | During your lifetime | After your death |
| Policy structure | Can be standalone or added to life | Standalone or combined |
| Cost | More expensive | Less expensive |
Most people buy life insurance with critical illness cover as a combined policy.
What Affects Your Premium
| Factor | Impact on Premium |
|---|---|
| Age | Increases with age |
| Smoking | 2–3x higher |
| Family medical history | May increase |
| Occupation | Higher risk = higher premium |
| Cover amount | More cover = higher premium |
| Policy term | Longer term = higher premium |
Standalone vs Accelerated
Standalone: Separate from life insurance. Pays out if you’re diagnosed, and life insurance still pays on death.
Accelerated: Combined with life insurance. Critical illness payout reduces or cancels the life cover.
Accelerated is cheaper but provides less total protection.
What’s NOT Covered
- Pre-existing conditions
- Minor heart attacks (with full recovery)
- Low-grade cancers (stage 1, some skin cancers)
- Mental health conditions
- Back, neck, or spinal conditions (unless trauma)
- HIV-related conditions
Who Needs It Most
- Mortgage holders — Your home could be at risk
- Single-income families — One illness could devastate household finances
- Self-employed — No sick pay safety net
- People with family history — Higher likelihood of claiming
Who Might Skip It
- Young, healthy, no dependents — Premiums might not justify the cover
- Large savings — Can self-insure
- Employer death-in-service benefits — Check what your employer provides
How to Buy
- Work out your cover amount
- Compare quotes (use a broker for the best rates)
- Be honest about medical history
- Check the condition list — not all policies are equal
- Review every 5 years
Bottom Line
Critical illness insurance is essential if you have a mortgage or family depending on your income. It’s not cheap, but neither is the alternative — losing your home or savings if you get seriously ill. For anyone else, it depends on your savings and personal risk tolerance.