What is critical illness cover and how much might I need?

Critical illness insurance can help support you and your loved ones financially if you've been diagnosed with a specific condition. Generally, critical illness pays out a lump sum. This can help you cover treatment costs and other expenses, like regular bills. You should be aware that there's generally no cash-in value at any time with critical illness insurance.

How do you know how much cover you need? This article addresses the key points worth considering before taking our a critical illness policy.

Critical illness cover pays out a lump sum if you're diagnosed with, or undergo surgery for, a critical illness that meets the policy definition during the policy term. Most policies have a survival period that you need to meet before you can claim. This tends to be 10 or 14 days dependent on the product. Policies only cover the critical illnesses defined in the policy conditions and no others. These products are designed to help support you and your family financially while you deal with your diagnosis - so you can focus on your recovery without worrying about how the bills will be paid.

It covers what's defined in the policy terms as a 'critical illness.' Examples of critical illness are cancer, heart attack and stroke.

Our Critical illness Plan pays out provided that the policyholder is a UK resident, is aged between 18 and 64, that their critical illness meets our policy definition and that they have survived at least 10 days post-diagnosis. There is no cash-in value at any time. The full cover amount will only be paid out once. Also, if payments stop, the policy will end.

The type of cover you choose depends on how you plan to use the payout. The following details may help you make the right choice for you.

Level cover

For level cover, you can pay the same amount each month, but it's worth noting the payments will be larger than for the decreasing option. This is because the cover value doesn't change; it's worth the same at the start and end of the policy term.  You might choose this option if you want to help cover general outgoings, any additional health-related costs, and other financial commitments.

You can choose to protect your cover amount from the effects of inflation, so it increases over time. This means your monthly payments may also rise, and at a higher rate, but the lump sum won't be worth less in the future because of the rise in the cost of living. 

Decreasing cover

For decreasing cover, you also pay the same amount each month, but the value of your cover goes down each month. This means the cover is worth the highest value at the start of your policy term and at its lowest value at the end of the policy term. This could be worth considering if you want to cover any debts or loans that you repay monthly, such as a repayment mortgage.

Ask yourself what costs you'd need the payout to go towards if you had treatment for a serious health condition and couldn't work. These might include:

• A mortgage or rent.
  
• Loans you’re paying off over time.
• Childcare or other costs for your dependants.
• Regular bills, like gas, electricity and water, council tax and car insurance.
• Any medical expenses from adapting your home or travelling to hospital for treatment, or private medical care.
• General living costs, like food bills and petrol.

Once you know what you’d need to cover, and how much you'd need, consider if you have any savings or assets you could use. You may also be eligible for state benefits, like Employment and Support Allowance. Or you may have an employee benefits package that covers a longer time off work due to sickness.

Finally, you should have a ballpark figure of how much you’d need to be paid out. You can refer to this figure when you get a quote. If you’re not sure, you might want to speak to a financial adviser. If you don't have a financial adviser, you can find one at unbiased.co.uk. Please be aware that you may need to pay for this advice.

This depends upon your financial situation and what you need from the policy. The following factors could all impact the monthly premium amount:-

• How long you want the policy to last.
• What type of policy you have.
• Your age.
• Your occupation.
• Your health and lifestyle, including whether or not you smoke and your family medical history.

As at January 2025, over half of our customers paid just £20 a month or less for our Critical illness Plan. It's worth mentioning that with a critical illness policy there is no cash-in value at any time and if your payments stop, the policy will end.