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The essentials you need to know about critical illness cover

May 07, 2025

Category: News

If you face a serious illness, it could place pressure on your finances and mean you’re not able to focus on what’s most important – your health. Yet, research suggests many families could be overlooking the protection that critical illness cover could provide. Read on to find out how critical illness cover works and how it could improve your financial resilience. 

Critical illness cover may pay out if you were diagnosed with a serious illness. It could help you pay off large financial commitments, such as your mortgage, maintain your lifestyle, or provide for dependants. 

Serious illnesses might be rare, but that doesn’t mean they won’t affect your family. According to Macmillan Cancer Support, someone receives a cancer diagnosis at least every 90 seconds in the UK. So, while you or a loved one falling ill might not be something you want to think about, taking steps to provide a safety net could be valuable.

Not having to worry about your finances should you fall seriously ill could support your wellbeing and mean you’re able to focus on recovering or adjusting your lifestyle. 

Despite the potential benefits, many families haven’t taken out or even considered critical illness cover. A survey published in IFA Magazine found that 73% of adults under the age of 40 don’t have critical illness cover to support themselves or their families, and more than half didn’t understand what it’s for. 

If you don’t already have critical illness cover in place, here are some of the essentials you need to know. 

1. Critical illness cover could pay out a lump sum

When the conditions are met, critical illness cover would pay out a lump sum. You can use this money however you wish. As you’ll only receive a single payment, you might want to consider how you’d use the money to create long-term financial security if you’re unable to return to work. 

When you take out critical illness cover, you can set how much you’d receive. So, spending some time understanding your finances and how you’d be affected if you were unable to work could be valuable. Reviewing your other assets or protection, and setting out what your priorities would be could help you select an appropriate level of cover.

Typically, the greater the potential payout, the higher your monthly premiums to maintain the cover will be. 

2. Not all illnesses would be covered

Critical illness cover will only pay out under certain conditions, and not all illnesses would result in receiving a lump sum. It’s important to understand how comprehensive critical illness cover is, as it can vary between providers.

According to a report in FTAdviser, half of people with critical illness cover are not fully aware of the conditions they would be covered for if they needed to make a claim. In many cases, families believed they had a greater level of cover than they did. It could mean their financial safety net isn’t as resilient as they believe, and they might face a shortfall at what may be an already challenging time.

As well as covering particular conditions, critical illness cover might specify severity too. For instance, a cancer diagnosis may not automatically result in a payout. Before you take out critical illness cover, it’s important to understand if it provides the protection you want and exactly in what circumstances you could make a successful claim. 

If critical illness cover isn’t right for you, there may be other options. For example, income protection would pay a regular income if you were unable to work due to an accident or illness and may cover more conditions. 

3. There may be additional exclusions based on your health

In addition to understanding what conditions are covered, there might be further exclusions. Pre-existing medical conditions or illnesses that a close family member has been diagnosed with will likely be excluded. 

While it might be tempting to omit information, doing so could mean the cover is cancelled and a claim refused. 

4. A range of factors will affect the cost of critical illness cover

Many factors will affect the cost of maintaining your critical illness cover, from your health to whether you smoke. But with many providers offering cover from less than £10 a month, it could be cheaper than you think. 

It’s worth shopping around and comparing different providers. The premiums could vary significantly. However, the cheapest deal isn’t automatically the right option. For example, if the cover is less comprehensive than alternatives, it may not provide the peace of mind you want. 

5. In 2022, 91% of critical illness claims were paid

While you might believe that providers don’t pay out when claims are made, the statistics paint a different picture. Data from the Association of British Insurers shows that in 2022, 91.6% of critical illness claims were paid – more than 19,000 families received a lump sum payment that may have helped them deal with a serious condition and challenging circumstances. 

Contact us to discuss your financial resilience

Critical illness cover is just one way to create a safety net in case you fall seriously ill. There could be other steps you may take to improve your financial resilience too. Please contact us to discuss how you could provide financial security for you and your family. 

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

Approved by The Openwork Partnership on 20/05/2024. 

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