Guide to Critical Illness Cover Insurance
Critical ILlness Cover

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Guide Contents

What is critical illness insurance?
Why you might need critical illness insurance
What are the different types of critical illness insurance?
Critical illness premium options
Shopping around for your critical illness insurance
Applying for your critical illness insurance
Critical illness insurance FAQs
Where can I go to get more help?

What is Critical Illness Insurance?

Critical illness insurance (also known as critical illness cover, serious illness cover and living assurance) is a type of insurance which usually provides a tax free one off lump sum payment of anything up to £500,000 or more. Upon the insured person being diagnosed with, or treated for, a serious illness and they survive beyond a specified period, usually between 14 and 30 days.

The serious illnesses covered by this type of insurance are specified by the insurer when you take the policy out. The lump sum payment can be made as a one off payment or structured to be paid over a fixed number of regular instalments.

Unlike private health insurance which specifically covers medical costs, critical illness insurance payouts can be used however the insured person however wants to spend it, for example to:

  • pay for the costs of care and treatment
  • pay for recuperation aids
  • pay off debts
  • replace any lost income due to a decreasing ability to earn
  • pay for a complete change in lifestyle

Critical illness insurance policy premiums are required to be paid either monthly or annually usually by direct debit or cheque. Critical Illness insurance can be set up for a fixed term, i.e. a specified number of years (anything from 2 to 50 years depending on your age), or it can be set up as a renewable term policy where your premium and insurance are renewed at regular intervals until a claim is made or the policy is cancelled.

Critical illness insurance is one of the more complicated types of insurance available, because of the difficulties associated with defining exactly:

  • what a critical illness is, and
  • what constitutes a diagnosis
Not all insurers cover the same critical illnesses!

Specified cancers, heart attacks and strokes are commonly covered by all UK critical illness policies but the other illnesses covered vary between insurers. To address confusion in the marketplace the UK Association of British Insurers (ABI) issued a Statement of Best Practice for Critical Illness Insurance which includes a number of standard definitions for common critical illnesses which insurers use in relation to their critical illness insurance products, helping consumers understand what illnesses are covered.

There are 23 critical illnesses currently listed in the ABI definitions, which all critical illness insurers provide cover for. Most insurers provide cover for around 30 illnesses, with some covering as many as 150 or more.

This booklet looks at the different types of critical illness insurance available to individuals, along with things to consider, to enable you to make an informed decision about whether critical illness insurance is right for you.

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