Critical Illness Cover

Critical illness cover is designed to pay out a lump sum if you are diagnosed with a serious medical condition specified under the policy. Conditions commonly covered include certain types of cancer, heart attacks and strokes. The payout can provide valuable breathing space at a difficult time.

The money you receive can be used in whatever way is most helpful to you and your family. Clients often use it to help with medical or treatment costs, reduce or clear a mortgage, make essential home adjustments, or simply ease day-to-day financial pressures while they focus on recovery.

At Lewis Christopher we arrange critical illness cover for clients in Milton Keynes, Bedfordshire and across Buckinghamshire. This page covers the questions we are asked most often: what critical illness cover is, what counts as a critical illness, how much cover you need, whether you can have it without life insurance, and how a payout is taxed.

Critical illness insurance pays a one-off lump sum if you are diagnosed with one of the conditions listed in your policy and the diagnosis meets the policy’s definition of that condition. Once the full amount has been paid, the policy normally ends.

It is different from the other main types of protection. Life insurance pays out if you die. Income protection pays a regular monthly income while illness or injury stops you working. Critical illness cover pays a single sum while you are alive, which you can use however you choose.

Most policies have a survival period, typically 10 or 14 days from diagnosis, which you need to survive before a claim can be paid.

The Association of British Insurers (ABI) sets the minimum standards a policy must meet to be called critical illness cover. Policies that meet those standards cover cancer, heart attack and stroke as a minimum, using standard definitions for each. Most insurers then cover many more conditions, such as Parkinson’s disease and major organ transplants.

The definition matters as much as the name of the condition. Less advanced or non-invasive cancers, for example, are often excluded from the full payout, and a condition you already have, or are considered at risk of, may be excluded when the policy starts.

Some policies also make a smaller, partial payment for certain less severe conditions without ending your cover, and many include some cover for your children.

Why the number of conditions is not the whole story

You may see policies advertised as covering 36, 50 or more conditions. Insurers generally cover somewhere between 20 and 60, but a longer list is not automatically better cover. What counts is how each condition is defined, how the core conditions are worded, and whether there are partial payments.

When we quote, we will provide a key features document, which lists the illnesses the critical illness policy covers. We would encourage you to read it before going ahead.

There is no single right figure, but there is a sensible way to work it out. Start with what you would want to clear, such as the mortgage and any other debts. Then think about how long you might be off work, or working less, while you recover, and what your household would need to live on during that time. Add any one-off costs, such as adapting your home or paying for treatment or care.

Then look at what is already in place. Sick pay from an employer is often limited, and many employees move onto Statutory Sick Pay within months. Savings, a partner’s income and any cover you already hold all reduce the gap.

We usually start with your mortgage balance and work from there. Some clients choose life cover to clear the mortgage, with a smaller amount of critical illness cover to help with the extra costs a serious illness can bring. We’ll go through the figures with you and recommend a level of cover that fits both the need and your budget.

Many people take critical illness cover alongside a mortgage, so the mortgage could be paid off or reduced if they became seriously ill. Cover can be level, where the amount stays the same throughout the term, or decreasing, where it reduces over time roughly in line with a repayment mortgage. Decreasing cover pays less the later in the term you claim, which is reflected in the price.

If you are buying your first home or moving to a new mortgage, it is a good moment to check that your protection still matches what you owe.

Yes. Critical illness cover can be bought on its own as a standalone policy, or alongside life insurance.

Combined life and critical illness cover pays out once, either on a valid critical illness claim or on death, and then ends. It is often cheaper than two separate policies. Separate policies cost more but can each pay out, so a critical illness claim does not use up your life cover.

Which structure suits you depends on your budget and on what each policy is there to protect. Our life insurance page covers life cover in more detail.

If you own the policy personally and pay the premiums yourself, the payout is normally tax-free. The position can be different where an employer or business pays for the cover, for example through a company scheme or business protection. If the money is still in your estate when you die, it may count towards the value of your estate for inheritance tax.

The price depends mainly on your age, your health and medical history, whether you smoke, your occupation, how much cover you want and for how long. Choosing cover that rises with inflation means your premiums may rise too.

It is important to answer the insurer’s questions fully and accurately when you apply. If you do not, a claim could be reduced or turned down.

It depends on how you and your family would manage if you could not work for a long period. Cover tends to matter most where your household relies heavily on your income or where your sick pay would be limited. If you have enough savings to cover your outgoings, or a partner who could support the household, you may need less cover, or decide you do not need it.

Critical illness cover often sits alongside income protection, which pays a regular income if illness or injury stops you working, rather than a single lump sum.

Having critical illness cover alongside life insurance can form an important part of a wider protection plan, helping to reduce the financial impact of serious illness and giving you greater confidence that there is a safety net in place if the unexpected happens.

If you already have a critical illness policy, we’re happy to review it. Often it will still be doing its job, but it’s worth checking it still fits where you are now, whether that means adding cover or finding you have more than you need.