Critical illness cover – why do I need one?

Critical illness cover

I’m active and healthy, why do i need critical illness? Statistically we have a one in four chance of suffering a critical illness before the age of 60, yet only 8% of UK adults have adequate critical illness cover.

What is Critical Illness Cover?

Critical Illness Cover is an insurance policy which provides financial protection should you suffer from one of a variety of serious illnesses or conditions including heart disease / attacks or some forms of cancer. In the event that you are diagnosed or stricken by one of these conditions then the policy will pay out a tax-free lump sum to ease financial pressures when it’s needed most. A critical illness policy differs from a medical plan as the latter has payout limitations and will help towards hospitalisation, emergency room treatment and short term care only.

Illness can impact our ability to earn

Medical advancements continue to provide us with greater chances of overcoming illness and diseases for which there was no cure just a generation ago. As a result the population is living longer, with survival rates for serious illnesses generally rising. For instance, the combined 10-year survival rate for breast cancer is now over 75%, according to Cancer Research UK.

However, while it’s true that survival prospects are improving, the reality is that we are certainly not immune from being struck down by illness in the first place. And when serious illness strikes, it can have a major impact on lifestyle and finances. Loss of income through long-term sick leave, combined with increased costs associated with a diagnosis can stretch the purse strings to breaking point and add further stress to an already stressful situation – 4 out of 5 cancer sufferers have reported this to be a real issue.

How critical illness cover Works

Traditionally a critical illness cover is taken out for a pre-determined amount of time. This might be for the duration of your mortgage period, or perhaps until your children have grown up; or any other time-frame which suits your circumstances, including a life-long policy.

Should you be diagnosed with an illness covered by the policy, it will pay out in one lump, tax-free payment. As a rule, critical illness policies pay out regardless of severity. As with all insurance policies, if you pay your regular premium then you will remain covered. In the event of a pay-out, the policy will end.

Things to consider when taking deciding on critical illness cover:

  • How long do you need the cover for?
  • How much do you require the pay-out to be? (the higher the pay-out, the higher the premium is likely to be)
  • What are you permanent financial commitments, regardless of health?
  • How much income would you lose should illness strike?
  • How much does Critical Illness Cover cost?

Again, as with many personal insurance policies, the cost of your critical illness cover will depend on a range of variables around your own personal circumstances, such as:

  • Your age
  • Your gender
  • Your health at the time of application
  • If you smoke or use other tobacco products

In addition the cost will also be determined on the amount of time you wish the policy to run and the level of pay-out you wish in the event of a claim. To receive a quote tailored to your circumstances, speak to a qualified, licenced financial advisor who will have access to the best and most appropriate cover and use the leading international insurance companies.

Critical Illness Insurance is, if you compare it to other expenditure and indeed, other insurances, a relatively cheap insurance cover which can offer a valuable level of peace of mind.

What types of illness are covered?

Each policy from different insurance companies will have their own criteria meaning that some policies will not cover certain illnesses or conditions. Therefore it’s vitally important when applying for critical illness cover to ensure that you are fully aware of what is and what isn’t covered by the policies you are considering.

Typically, critical illness insurance will provide cover for conditions such as:

  • Heart Attack
  • Strokes
  • Cancers – typically cover for cancer will be determined by type and stage / progression.
  • Major life-altering illnesses such as Multiple Sclerosis
  • You may also have cover within your insurance for disability in the event of an injury or illness.

Is critical illness cover right for me?

While only you can ultimately answer that, you should consider the following. If you were to fall ill would you have enough money to cover your costs of living? The reality for many is that state funded financial assistance often does not stretch far enough to replace your salary should the worst occur. Supporting your family, paying your mortgage and other daily expenditure still needs to be covered and unless you have significant savings or an extremely generous package through your employer, you could find yourself facing a significant financial shortfall.

Aren’t I suitably covered through life assurance and health insurance?

Life assurance is seen as an essential form of cover as it eases financial burdens on a loved one should you unexpectedly die. The reality is that we are 5 times more likely to require assistance through illness than through premature death. And, while we are surviving serious illness more often, the probability of contracting such an illness remains extremely high:

  • 1 in 3 people will have some form of cancer in their lifetime (Cancer Research UK)
  • 1 in 2men (aged 40+) and 1 in 3 women will suffer heart disease within their lifetime.

Also, while health insurance may cover your medical costs should you fall ill, this will not be a cover for your ongoing living costs and expenses.

What might critical illness insurance cover?

Typically you would take out a critical illness insurance policy to cover the financial impact that a serious illness may bring about. This may be to:

  • Cover the cost of treatment and associated care
  • Replace lost income through inability to work
  • Cover the cost of mortgages and other expenses
  • Fund any necessary changes in lifestyle upon recuperation

How can I take out a critical illness policy?

Applying for and taking out critical illness insurance can be a simple procedure. You can have it as a bolt-on to an existing life assurance policy or you can find a range of excellent, tailor-made stand-alone options that are readily and cheaply available.

Critical Illness cover can provide an invaluable degree of peace of mind for many people in the event of unforeseen health problems. If you would like to find out more then speak to a financial advisor.

Quick Insurance Tip:
Ask your employer what amount of critical illness cover you have in place…How long would this last you in the event not being able to work from ill health?


Chris has 9 years’ experience as a UK pension specialist and licensed financial advisor. He specialises in helping clients make balanced financial decisions to grow their personal wealth.

Chris is licensed with Holborn Assets, an award-winning international financial advisory firm established in 1999, with 10 offices and 15,000 clients worldwide.



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