5 things you need to know before you buy critical illness cover

Critical illness cover can offer peace of mind that you’ll receive a payout if you unexpectedly fall ill. Here’s how to find the right critical illness policy for your needs.

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Critical illness cover could provide the answer if you are concerned about your ability to cover the cost of living following a serious medical diagnosis. 

However, it’s essential to consider a number of points before deciding on whether to buy a policy.

1. What it covers

Critical illness cover is a type of health insurance that’s designed to pay out a lump sum if you’re diagnosed with a life-threatening illness.

The number and variety of conditions covered differs from insurer to insurer, but there are seven core conditions that tend to be shared by all critical illness policies:

  • Cancer

  • Issues requiring a coronary artery bypass

  • Heart attack

  • Kidney failure

  • Major organ transplant

  • Multiple sclerosis

  • Stroke

Permanent disability caused by illness or injury is also usually covered by most policies, although it’s best to read the small print just to be on the safe side.

How does critical illness cover work?

If you’re diagnosed with one of the conditions covered by the policy, you should receive a payout from your insurer which could amount to several hundreds of thousands of pounds.

Critical illness cover differs from income protection insurance because you won’t receive a regular payout to replace any loss of income.

Instead, you’ll usually get a one-off tax-free payment, which could be used to help with things like your living costs and mortgage repayments or put towards paying for treatment or care.

2. When to consider critical illness cover

Critical illness cover might be sold alongside financial products like mortgages. You’re under no obligation to buy a policy, but it can provide peace of mind giving you one less thing to worry about.

Critical illness cover could be right for you if:

  • You would become seriously ill or disabled and can no longer work, and you lack enough savings to cover your outgoings.

  • Your employer doesn’t offer any benefits packages that cover a period of long-term sickness.

  • Statutory sick pay, currently £96.35 a week, would not fill the shortfall in your income, even with savings taken into account.

  • You’re single with dependants who’d rely on your income to survive.

Beware critical illness cover exclusions

Critical illness cover often comes with lots of exclusions and very specific conditions which establish when you can make a claim, for example:

  • Although the Association of British Insurers dictates heart attacks, cancer and strokes must be covered by critical illness policies, some other serious conditions may not be.

  • Some policies won’t cover illnesses triggered by pre-existing medical conditions. As such, you must provide your insurer with as much detail as possible about any medical conditions you have or have had upon taking out a policy.

 Although disclosing your medical history might result in you being given a higher premium, it’s worth paying more to know you’ll be covered if make a claim.

3. What good critical illness cover looks like

You shouldn’t just go for the cheapest plan, as this may not provide you with the cover you need.

It’s important to find a policy that you can afford, but only if you can balance this with cover that’ll be useful to you in the event of illness.

For example, if you’re on a limited budget you might not need expensive comprehensive cover as a basic policy may give you the cover and reassurance you need.

You should shop around before you decide on a policy, so you can compare the benefits, costs, allowances, and restrictions of several policies until you find one that suits you.

Remember to always look beyond the policy summary and find out what the policy will really cover in the event you need to make a claim, for example:

  • Are the premiums fixed? Fixed premiums mean the amount you pay to keep up the cost of cover will stay the same throughout the life of your policy, so you can budget accordingly and not face premium rises. Not all policies have fixed premiums meaning payments could rise at some point.

  • Are children covered? Many policies now offer cover for children, meaning that should your children fall critically ill they will be covered under your policy and you’ll receive a lump-sum payout.

4. What critical illness cover costs

Costs will vary from insurer to insurer, and according to what kind of cover you require. The price you pay will also depend on how 'high risk' a customer you appear to be.

This means how likely your insurer sees you as becoming critically ill during the policy term. So, you may pay higher premiums if you have:

  • Any pre-existing medical conditions

  • A history of illness

  • Family members who suffer from any serious illnesses

Also, if you are a smoker you can expect to pay more in premiums than non-smokers, as so many health risks are associated with smoking.

The waiting period

The cost of premiums may also be affected by your selected waiting period.

This is the period of time, usually around three months, after taking out a policy during which you cannot make a claim.

Beyond that point, you’ll usually have to wait for around 30 days before you receive your payout. You can arrange for a shorter waiting period, but you’ll pay more in premiums.

If your illness is a permanent disability rather than a debilitating illness that severely shortens your life expectancy, you may have to wait six months to a year after making a claim for your insurer to settle it.

5. Always remember...

When you buy a critical illness policy you’ll have to complete a detailed form specifying your medical history, plus any medical conditions in your family.

If in doubt about which conditions to include, it is better to include all of them because one condition may make you more likely to suffer from another condition later in life.

Some insurers, although not all, will also require you to undergo a medical examination before being offered a quote for cover.

Finally, when you’ve taken out your policy there’ll usually be a cooling-off period of around 30 days. You may cancel your policy and get a full refund if you change your mind within this period.

The right cover can help protect your future and your loved ones by providing for you when you need it most. But it’s a commitment not to be taken lightly, so seek advice and don’t discount alternatives such as income protection insurance

The right cover can help protect your future and your loved ones by providing for you when you need it most.