Critical illness insurance is designed to provide you with financial protection in the event that you are diagnosed during the term of the policy.

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  • If you are unfortunate enough to be diagnosed with a critical illness, your insurer will pay out a tax-free lump sum directly to you, to cover the cost of treatment and any loss of earnings. Life insurance only pays out to your beneficiaries in the event of your death.

    Critical illness cover was developed by insurers as modern medicine enabled more people to survive conditions such as cancer or strokes, but are not well enough to be able to return to work.

    What are your chances of contracting a critical illness?

    Most people imagine that a serious illness is something that only happens to other people. However, the real figures show a very different picture. A woman aged 20 - 40 has the following chance of suffering a critical illness before the age of 65:

    • Cancer - one in seven
    • Heart attack - one in 17
    • Stroke - one in 27
    • Any of the above - one in five

    A man aged between 20 and 40 has the following chance of suffering a critical illness before the age of 65:

    • Cancer - one in 11
    • Heart attack - one in seven
    • Stroke - one in 26
    • Any of the above - one in four
    • Two fifths of diagnosed cancer sufferers aged 35-54 will survive for at least three years
    • 80 per cent of men and women aged 45-65 will survive a heart attack, and over 50 per cent of people who have a heart attack are still alive 10 years later
    • Stroke is the largest cause of severe disability, with 350,000 people affected at any one time (nearly 70 per cent of stroke victims survive for at least 12 months)

    An aid to recovery

    A critical illness plan pays out a tax-free lump sum in the event that you suffer a critical illness such as cancer, a heart attack, multiple sclerosis, or a stroke. Each policy provider will specify exactly the range of illnesses that its policy will cover. 

    It is worth noting that critical illness insurance is separate from private medical insurance. Critical illness is also different to income protection insurance, which pays out for a short term period (usually up to one year), in the event of unemployment through short-term illness of disability. 

    The cost of critical illness cover

    Like life insurance cover, the cost of the policy will depend on your own personal circumstances, such as:

    • your age
    • gender
    • your occupation
    • whether you smoke
    • your current health and medical history
    • the range of illnesses covered by the policy

    The answers to these questions will determine your premiums. In some special circumstances, the insurer may want further information about you from your doctor, or you may be asked to undergo a medical to determine your current state of health. However, this generally only occurs in special circumstances and most critical illness policies will merely require that you fill in the appropriate forms honestly and correctly.

    If you stop paying your premiums for any reason, the policy will become void.

    Choosing the right policy

    Critical illness policies are very accessible and these days, there are literally hundreds of policies available from over 60 different insurers. When choosing a critical illness policy, you should avoid simply choosing the cheapest. Similarly, the most expensive will probably cover you against every disease imaginable, and you may not need such detail in your policy.

    Use the Internet to search for different policies and compare them against each other. Always read the small print of any policy that interests you and make sure it is the most appropriate policy for your circumstances.

    You can also visit the Association of British Insurers for a list of insurers that provide critical illness cover.

    When is it wise to have a critical illness policy?

    Your need to be covered by insurance against a critical illness will largely depend on your lifestage and your particular circumstances. These might include having a family to support, being a homeowner and paying a mortgage, those who have paid off their mortgage, or those who have separated from their partner and have dependant children.

    Having a family to support

    If you are about to start a family (or have one already), a critical illness policy is a smart way to plan for the entire family's protection from the outset. By buying the policy earlier in life, you will receive lower premiums because you should be in better physical shape.

    Homeowners paying a mortgage

    A critical illness policy can protect a family in a variety of ways. If you are a homeowner and already have a mortgage protection policy, critical illness can provide protection against your salary. As the family breadwinner, if were to you suffer a stroke and were unable to work, a critical illness policy would ensure the receipt of a lump sum to cover medical expenses or loss of income.

    If you buy a mortgage protection policy with critical illness incorporated into the policy, the lump sum paid in the event of illness will decline over time, as the amount you have to repay on the mortgage declines. It is therefore advisable to have two separate policies, a mortgage protection policy and a separate critical illness policy.

    Homeowners who have paid off their mortgage

    If you have paid off your mortgage, which included critical illness cover, but still have dependants, you should consider a seperate critical illness policy. It will enable you to continue to protect your family should the unthinkable happen to you.

    Those separated from their partner

    If you are unfortunate enough to have to go through divorce proceedings but are awarded custody of the children, you could ask your former spouse to take out a critical illness policy. If your former partner is required to pay maintenance costs but is unable to work, the money spent on the children may even stop.

    If you set up a critical illness policy, the money can be paid into a trust fund from which the children will benefit directly. The policy cannot be in the name of the children, however.

    Related information

    Some information contained herein may have changed since it was first published. PrimeLocation strongly advises you to seek current legal and/or financial advice from a qualified professional. If you have any queries relating to the content, please email

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