What the heck is critical illness cover?

Find out about critical illness cover and whether you actually need it

Felicity Hannah - Virgin Money Living Mentor

by Felicity Hannah | Independent Money Mentor

Award-winning personal finance and consumer affairs journalist


Thanks to our healthcare system, we Brits don’t have to worry about falling sick or becoming injured and being unable to afford treatment.

However, while our hospitals are free at the point of use, if you suffer a life changing illness then you will need help to adjust to your new circumstances – especially if you are unable to work while you are recovering.

Enter critical illness cover, which insures you against a number of specified illnesses and conditions, and provides a lump sum if you are diagnosed with one of them. There are no restrictions on how you spend that cash, you can use it to pay your mortgage, provide for your family or even pay for private treatment if that’s what you decide to do. The idea is that money worries shouldn’t be a factor during the worst of times – but critical illness cover varies and it has restrictions. That means it’s incredibly important you understand exactly what’s available and what your policy will and won’t protect you against.

The key questions

Yes, thinking about money is dull and thinking about severe illness is depressing, but this stuff is important to know before something bad happens. So before you find your eye distracted by a video of a cat playing the piano on a surfboard, here’s a super-fast guide to critical illness cover.


What is it? 

It’s an insurance policy that pays out a tax-free lump sum if you are diagnosed with a specified illness or condition during the lifetime of the policy.


Do I buy it separately? 

You can often buy critical illness cover as part of a life insurance policy, but you can take it out separately if you prefer.


Why would I do that? 

You might decide you don’t need life insurance, perhaps because you have no dependants or because your employer provides a good death-in-service benefit. However, considering critical illness cover may still be worth it if you’re the type of person who changes jobs frequently or due to the fact that insurance usually gets more expensive the older you are when you take it out.


What does it cover? 

That depends on the policy. All policies cover cancer, heart attacks and strokes. However, after that it can really vary depending on the insurer. There will be a list in the small print. Read it, as it is essential you’re comfortable with its limitations.


What about my family? 

If you’re a couple then you can choose to apply for individual cover or as part of a joint life insurance policy. It’s also usually possible to add children to a policy, meaning you could take time off work to focus on their treatment should they become ill.


Doesn’t my life insurance cover this?

Most life insurance policies include terminal illness cover and pay out upon a diagnosis that means the patient is unlikely to live beyond a few months. But critical illness cover is for serious conditions that are not necessarily fatal. In fact, the Association of British Insurers reports that people are five times more likely to claim on a critical illness policy than on life insurance.


Do I need it? 

If you don’t know whether your family could cope if you became unable to work, or if you’re unsure whether you could maintain your lifestyle, then critical illness cover could provide real peace of mind.

Before making financial decisions always do research, or talk to a financial adviser. Views are those of our mentors and customers and do not constitute financial advice.