How and where to buy critical illness insurance

Critical illness insurance pays out a lump sum if you get a serious illness, such as cancer, or suffer a heart attack or stroke. The tax-free payout can be used any way you like and could be used to cover your mortgage or rent, living expenses, adjustments to your home, and any medical treatment you might need.

How much does it cost?

Not sure what something means? Have a look at our Protection insurance glossary.

Critical illness insurance costs vary greatly, and payments (also known as a premiums) depend on a few 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)

If you have several risk factors for a particular condition, that illness may not be covered by your policy or you may need to pay a higher premium.

It is usually taken out with other insurance products such as life insurance or income protection and you can adjust the amount of cover you take out according to your needs and monthly payments. The amount of cover you need will depend on, for instance:

  • Take home pay
  • Debts
  • Mortgage/rent payments
  • Dependants
  • Other insurance product you have
  • Work benefits

Critical illness insurance can be complicated and it would be worth talking to an adviser before choosing a policy.

How much cover do I need?

You can work out what level of cover is right for you in three quick steps.

Step 1: First add up:

  • Your debts: your mortgage and any other debts. These could include credit card debts or personal loans.
  • Expenses you want your insurance to cover: your essential monthly outgoings (x12), such as rent, utility bills, or your children’s maintenance costs.
  • A possible lump sum that you might think you’d need for medical costs or property changes

Step 2: Think about what you already have

If you’re employed, your benefits package may include some form of sick pay, which you might get if you can’t work due to illness or injury. You should be able to find details in your work contract, but if you can’t the HR department should be able to help you.

Also consider any savings or other income you might be able to use towards costs.

You can find out more in our guide What financial protection might you already have?

Step 3: Calculate the cover you need

Once you have these two figures, take away the cover you already have from the total amount you need – the result is the amount of cover you should take out.

Critical illness insurance example

Add up

John (42) and Judith (39) have a joint household income of £41,000 per year. They have an outstanding mortgage of £213,000 which they expect to pay off in 18 years. They also took out a £5,000 loan to purchase a car. Their basic monthly outgoings are £1,000 (£12,000 per year).

What you already have

Through his employer, John has a company sick pay scheme which means he will receive a full salary for his first three months off sick, then receive half his salary for the next three months, but if he is unable to work after this, he will not get anything else from his employer. This adds up to a total of £7,200. Judith is self-employed and does not have a similar benefit. He also has income protection covering 80% of his salary for six months.

Calculate what cover you need

They decide they would need to consider enough critical illness cover to pay some of the mortgage (£25, 000) as well as possible medical costs/home adjustments (£30,000). As a result they take out a policy worth £55,000.

What happens to the monthly payments if I can’t work?

You will usually need to continue to cover the monthly payments for the insurance even if you can’t work because of illness or injury. You can buy ‘waiver of premium’ cover, which will cover your monthly payments but usually only after you’ve been off sick for at least six months.

Where to get quotes

A financial adviser can help you decide whether a critical illness policy best matches your needs. There is usually no fee for using an adviser as they will take a commission from the insurer.

If you’ve been turned down for insurance because of medical conditions, a broker who specialises in high-risk cover may be your best option for finding a policy.

You can find an independent financial adviser via the links below.

Be honest about your medical history

97% of all individual claims were paid out in 2013 - an average of £8.4m a day for individual life, critical illness and income protection insurance claims, according to the ABI.

If you ever need to make a claim, insurance companies will look at your application form before they agree to pay out. If you didn’t take reasonable care to answer 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 with the insurer as soon as possible to let them know.

Use our FAQ guide, which covers the basic questions that you might want to ask an adviser, or the questions they will ask you.

Buying a policy

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 not covered (excluded) can vary by insurer. When comparing offers, read these details so you can compare like for like.

Use our protection insurance jargon buster to help you make sense of the jargon that’s often used.

Changing your mind

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

If you already have critical illness insurance is it worth switching?

It’s always worth looking around for a better deal. You can switch to another provider or change policy and keep the same provider but make sure you understand any changes in the new policy details and the conditions they cover. Also be aware that you might find yourself paying a little more, even with a better deal because you’ll be older than you were when you bought the first policy.

Critical illness insurance – choosing a policy

Do you need life insurance? This product will provide some financial support to your dependants if you die.

Do you need income protection insurance? This type of insurance provides regular payments if you are unable to work due to illness or injury.

Do you need payment protection insurance? Also known as PPI, this product will help you keep making payments if you can’t work due to an illness, injury or if you’re made redundant.

Do you need short term income protection? This solution provides short term cover to help you pay for essential outgoings if you find yourself unable to work.