Created by: Rebecca Goodman | 31 May 2019

Do you need critical illness insurance?

Critical illness insurance is designed to pay out a lump sum if you get one of the injuries or illnesses listed in the policy and you’re no longer able to work.

This can be anything from a stroke to a heart attack and a the money is paid out to cover your everyday costs. The sum will vary depending on the policy you have and it’s important to know exactly what is included before you buy.

Critical illness covers specific illnesses

If you take out a critical illness policy, it will only pay out if you get one of the illnesses listed within the policy. You may also get a one-off lump sum if you have an accident or illness which results in a permanent disability.

The cost of your policy depends on a number of things including: your age, health, profession, whether you smoke or not and how much cover is included in the policy.

It covers your income if you can’t work

Critical illness policies pay out a tax-free lump sum which should cover your income if you’re unable to work. If you have an accident or develop an illness whereby you can’t work, your employer will pay sick pay for a certain amount of time and when this ends you may be able to claim state benefits.

However, the amount available might not be enough to cover your income and that’s where policies such as critical illness insurance come into play.

Are all illnesses covered?

These policies don’t cover every eventuality so it’s important to check the small print before you buy. For example, some types of cancer might not be include or an illness may need to be at a certain stage before the policy can be used.

At the point when you take out a policy, any kind of illness you’ve already had treatment for will also be excluded from the policy.

It also doesn’t pay out upon the death of a policy holder, unlike with life insurance which is designed to only pay out in death.

Life insurance is designed to leave a sum of money for your loved ones to pay for everyday costs such as mortgage repayments. While critical illness policies are there to help you supplement your income if you’re out of work for a prolonged period of time.

What are the alternatives?

Before you even think about taking out a policy, double check with your employer as it may be the case that it already pays out for a policy for employees. If this is the case ask to look at the policy documents and check it provides the right kind of cover for you.

Depending on the seriousness of the accident or illness, your employer may offer a long-term sickness package which will cover your income while you’re off work.

If you are eligible you may be able to get Employment and Support Allowance which ranges from £70 to just £100 a week, depending on your circumstances.  

You may also have personal savings which can be used to supplement your income if you’re not able to work.

It’s also worth considering if you really need one of these policies. Your personal circumstances may mean you don’t need one, such as if you have a partner who can cover your outgoing payments or if you’ve already paid off your mortgage.

Critical illness insurance Insurance

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