How much critical illness cover do I need?

How much critical illness cover do I need? Thumbnail

Posted 16th August 2021 by

How much critical illness do you really need?

Life insurance is about leaving money behind so your loved ones do not suffer when you pass away. Critical illness is designed to help you protect your loved ones from financial suffering if you’re ever seriously ill.

If you’re reading this article you probably already know the benefits of critical illness cover, but you’re not yet sure how much critical illness cover you need.

Let’s start by saying critical illness is more expensive than life cover and the reason is simple. You are much more likely to claim on critical illness insurance, but more on that later.

Choosing an amount of cover that suits your needs may result in a monthly premium that exceeds what’s realistic when you consider your other financial commitments. So we’ve compiled a few pointers to help you decide how much cover you really need.

man in hospital suffering from a critical illness. woman by his bedside looks stressed

What Is Critical Illness Cover?

A critical illness insurance policy is designed to pay out a lump-sum if you are diagnosed with an specified illness during the policy term.

Let’s clear up few bits of jargon to help:

  • Policy Term: The length of time you wish to be covered for. The longer you wish for the cover to run, the more likely you are to claim so the higher the price.
  • Specified Illness: Each insurance provider has their own list of illnesses that they will pay out for. All of them include Cancer, Heart Attack and Stroke. Some also payout for conditions such as Multiple Sclerosis, Third Degree Burns, Major Organ Transplants and Comas, however, each also have their own definition of each illness. For instance, some minor forms of cancer are not covered by all insurers. It’s important to check your documents to understand exactly what specified illnesses are covered by your insurer.
  • Cover Amount / Sum Assured: These both mean the same thing. It’s simply the amount of money that will be paid out upon a successful claim.

Receiving a lump sum if you are diagnosed with a life-changing illness can ensure you and your family have one less thing to worry about. It’s a form of financial security that will give you options and lessen any financial impact on your family.

How can you work out the amount of critical illness cover you need?

You may need to grab a calculator to help with this question. To effectively work out the true impact of a critical illness diagnosis there’s a number of factors to consider.

 Start by adding up:

  • Your mortgage balance or total rent cost over the policy term
  • Total of any Loans or Credit Cards you’re paying off over time
  • Childcare or any other costs for your dependants
  • Standard bills: gas, electricity and water, council tax, car insurance and home insurance
  • Any medical expenses from adapting your home or travelling to hospital for treatment (including parking), or private medical care
  • General living expenses, including food, household goods, travel expenses and clothes etc.

Adding all of this up is not easy, but give it a go. It’s surprising how fast it adds up.

Once you know what you’d need to cover, and you’ve added it all up, then consider if:

  • You have any savings or investments you could dip into or use
  • You’d be eligible for benefits, like Employment Support Allowance or similar government incapacity benefits
  • Any employee benefits that cover a longer time off work because of sickness (also consider if you were to move companies, are they likely to have similar benefits?)
  • Any exisiting protection policies you may have.

Once you’ve completed this exercise, you should have a rough idea of your “ideal” cover level. If you’re still in doubt, it may be worth speaking to a non-advised, fee-free whole of market[1] broker. Being “non advised” means the broker is compelled to listen to your needs, explain all of your options and let you decide what’s best.

Often our level of cover will need to align with our monthly budget. If you decide to speak to a broker, they can help you find an exact level of cover that’s affordable.

illustration of critical illness insurance as a pair of hands protect a model house form 2 rows of dominos

What’s the right amount of critical illness cover for me?

You need to consider how badly a critical illness would impact you financially. What support could you rely on? Wether you’re single or have lots of people that financially depend on you, critical illness could be a good fit. It’s important to ensure that any cover level you choose is realistically affordable for the long term. It makes no sense to over commit yourself financially and then end up cancelling your protection.

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Family illustration

How much does critical illness cover cost?

The price depends on a number of factors. Your age when you take cover, how long you take it for, how much cover you want, your medical history (including pre-existing medical conditions), lifestyle, smoking or vaping, BMI and cover type all have an effect.

Speaking to a financial advisor or broker will give you the opportunity to compare different policy types and different insurance companies.

To help give you a ballpark figure, we’ve included an illustration of some quotes below*:

£250,000Life Only25 YearsLevel£10.89
£250,000Critical Illness25 YearsLevel£112.79
£250,000Life + Critical Illness25 YearsLevel£115.18

*Quotes generated using Iress on 30/06/2021 for a male non-smoker who is 33 years old.

You’ll note that the life and critical illness quote is over ten times the amount of life cover alone. While that may look expensive, it illustrates how much more likely you are to claim on critical illness than life insurance alone.

A broker can tailor make a policy for you. For example, if you need £250k to cover your mortgage but you only want £25k of Critical Illness they can do this.

Many people believe it’s better to have some cover than no cover. Imagine if you had to have a year off work. £25,000 may pay the mortgage and bills for that period. It could give you a well-deserved break and help you recover.

It’s important to consider the difference between short term and long-term illnesses

Critical illness cover will not cover a sniffle or a week off work. It’s designed for the type of diagnosis’s that could have a lasting or long term impact on your life. You may choose to consider savings or income protection cover for shorter term non critical illnesses.

Piggy bank with glasses illustrating income protection

What about income protection cover?

Often income protection is compared to critical illness insurance. Both are very different insurances but arguably some parts of the products work in similar ways. Income protection tends to be a more expensive option but instead of providing a lump sum it pays you a monthly income. It also usually has a waiting period before you can make a claim (between 1 to 12 months). Income protection policies also have a limit on how long they’ll pay out for (2 years to retirement).

Both types of policy provide different levels of protection. There are pros and cons to critical illness, just like any form of protection. [2]

Should life insurance and critical illness cover amounts be different?

There are two ways you can buy critical illness cover with a life insurance policy:

Accelerated Critical Illness insurance

Accelerated cover is the cheapest and most common form of critical illness. If you claim on the critical illness element your life cover will cease too. You may struggle to buy new life insurance after a critical illness so it’s worth considering what you may do with the payment and if you may need some additional life insurance.

Additional Critical Illness insurance

A far lesser known option than accelerated. Additional cover is exactly what it says on the tin. If you claim for a critical illness, then you’ll still have the same value left to claim on again for life cover.

It’s common for people to have an accelerated policy with different amounts of life and critical illness. For example, you could have £250,000 of mortgage life insurance with £10,000 of critical illness. Although, if the critical illness is accelerated, the life cover may not cover the mortgage if you need to claim on the critical illness. Here it could make sense to either increase the amount of cover, take a standalone life and critical illness policy of change the critical illness element to “additional”.

Always ensure your broker or life insurance adviser clearly explains what happens to your life insurance sum assured if you claim on the critical illness.

Buy Back Option

A few insurance companies also offer a service called “buy back”. With this option you can choose to re-purchase any lost life insurance because of a critical illness claim. The advantage is your cover is guaranteed (subject to the insurers typical terms) which means there won’t be any further medical underwriting. They will simply base the price upon your age and your health when you first took your policy.

Is terminal illness benefit the same as critical illness cover?

No. Terminal illness benefit is typically something that comes with a life insurance or criticial illness policy. Unlike critical illness insurance, terminal illness will only payout if a doctor gives you less than 12 or 18 months to live. This benefit then gives you the option of claiming your life insurance early (while you’re still alive). Alternatively, critical illness pays out a lump sum on diagnosis of a condition even if there’s a chance of you surviving the illness. [3]

teddy bear wearing a surgical mask with a yellow background

Are my children covered if I choose to add Critical Illness Cover?

Most insurers now offer children’s critical illness cover. Some offer it as a paid option, while others include it for no additional cost. Typically, insurers will payout a lump sum equal to a set percentage of your critical illness up to a capped amount. For instance, at the time of writing this is 50% of the value of your policy or £25,000 (whichever is lower) for Aviva policy holders.

Children’s conditions often vary a little to the ones adults are insured for. Always check your documents carefully to ensure you know exactly what you’re paying for. Your insurance company may also include an additional payout for children’s funerals.

Any payments made for children’s critical illness are not normally taken out of the insured amount for the adult. This means that if you should have to make a claim and you could then make a further claim in the future, for yourself.

What critical illnesses are covered under my policy?

All insurers have their own list of specified illnesses and illness definitions that they will payout for. The vast majority of claims are for Cancer, Heart Attacks and Strokes. Multiple Sclerosis also makes up a large percentage of young adult claims.

Insurance companies may cover other medical conditions, such as:

  • Alzheimer’s
  • Aorta graft surgery
  • Benign brain tumour
  • Blindness
  • Coma
  • Coronary artery by-pass surgery
  • Deafness
  • Heart valve replacement or repair
  • Kidney failure
  • Loss of hand or foot
  • Loss of speech
  • Major organ transplant
  • Motor neurone disease
  • Multiple sclerosis
  • Paralysis of limbs
  • Parkinson’s disease
  • Third-degree burns
  • Traumatic brain injury
  • Total Permanent Disability
  • And more…

In recent years some insurers have battled to grab headlines for insuring the highest number of critical illnesses. Sensibly insurers are now working towards simplifying their policies and ensuring they are adding the right value for customer.

The Association of British Insurers (ABI) set out minimum standards for critical illness definitions. When you read insurer documentation, you’ll notice they mark some conditions as “ABI” meaning they at least meet the ABI definition. Insurers can extend their definition to a more generous level, which the ABI classifies as ABI+.

If you carefully read this documentation, you’ll notice subtle differences between insurers. Try to not get too bogged down in the quantity of illnesses covered. The vast majority of claims are for the top 3 or 4 mentioned above [4].

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How do I make sure my critical illness policy will pay out?

90%+ of critical illness insurance claims are paid out. Claims that are declined are typically as a result of non-disclosure. This happens when you accidentally or deliberately misinform an insurer about your health or lifestyle during the application process.

In 2012, the Consumer Insurance (Disclosure and Representations) Act was passed. Since this point it has been the insurers responsibility to ask the questions they need to appropriately underwrite a policy. Providing you answer all of their questions accurately and carefully, the only reaon your policy would not pay out would be if you were to claim for something that does not meet your insurers illness defention.

Sometimes it’s easier to jot down your pre-existing conditions and medication before speaking to a critical illness expert.

It’s important to note, you must keep up your monthly payments until your claim is accepted. Failure to do so may invalidate your claim. Ask your broker to explain “Waiver of premium” if you are concerned with keeping up your payments due to illness or injury.

What happens to my life insurance if I claim on my critical illness policy?

When you claim on your critical illness policy, you will receive a tax-free lump sum[5]. If you’ve chosen an accelerated policy, then your payments and cover will end. Alternatively, if you’ve chosen an additional cover policy, then your premiums will continue for the life insurance element of your cover.

If you’ve chosen a “buy back” option, there is usually a period you need to wait before they will offer your life cover back to you.

Should I consider life insurance with critical illness cover?

Check out our Ultimate Guide to Life Insurance for more information on Life Insurance.


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[1] Protect Line use a panel of insurers to help you to find cover that is suitable for your needs. Protect Line may not have access to all insurers on the market. Protect Line can only offer you prices from insurers on their panel.

[2] Protect Line do not offer any advice on any product. Income protection may be suitable for your needs. If you are unsure of what product may suit you best, please seek financial advice.

[3] Terminal Illness benefit is often included with both life insurance and critical illness policies. Please read your documentation carefully to ensure you know what you are covered for.

[4] Claim Stats from Legal and General in 2020 shows the top 3 conditions as: Cancer-64%, Heart Related-13%, Stroke-7%. 84% of claims paid in 2020 were for these 3 conditions.

[5] HMRC do not currently treat Critical illness payouts as income ( If you pass away before spending your payout it will form part of your estate and will be taxed accordingly. Taxation policies change from time to time. Please refer any taxation questions to a qualified accountant or to the HRMC.

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Chris Reed

Senior Financial Service & Marketing Leader | Experienced in Sales Leadership, Business Development and Digital Marketing Lead Generation | Passion for progressing business using technology.

I have worked for Protect Line since 2011 in many different positions. I have a passion for protection and I love helping ensure as a business we talk in plain English.

In my opinion, financial protection should be a part of our schools curriculum. Currently it's down to the private sector to help provide unbiased factual information.

My aim is to help share the benefits of using a non-advised brokerage to secure financial protection for your family.