Critical Illness Cover – what is it and do you need it?

The NHS provides many benefits for employees, including death benefits and sick pay.  However, one thing it doesn’t provide is a payout on diagnosis of a critical illness such as cancer, stroke or heart attack, or a condition such as multiple sclerosis. 

Many doctors have private life insurance on top of their NHS benefits, particularly if they have a mortgage, in case the worse happens.  However, while this is the worst case scenario, it isn’t the most likely.  It is far more likely to be diagnosed with a critical illness than to die while of working age.  This doesn’t mean doctors should swap their life insurance for critical illness cover, but that they should consider having critical illness cover as well.

As well as impacting your ability to work, the diagnosis of a critical illness may bring expenses such as needing to adapt your home or travel for treatment.  It can make previously manageable money commitments – outstanding loans or a mortgage for example – more of a concern.  Critical illness cover pays out a lump sum in the event of such a diagnosis, allowing you to meet your expenses, pay off debts or simply bring more flexibility into the household finances so you don’t need to rush your return to work. 

Many critical illness policies also include children’s critical illness cover at no extra charge.  This could be extremely valuable in facilitating time off work, travel or purchasing any equipment to help your child should the need arise.

Critical Illness Cover – Designed by a Surgeon

The first critical illness policy was in fact designed by a surgeon – Dr Marius Barnard.  Barnard was a member of the medical team who carried out the first human to human heart transplant in 1967.  He both contributed to and witnessed the increase in survival rates resulting from improvements in medical science.  He realised that when patients lived beyond what would otherwise be fatal illnesses, their financial health and consequently quality of life and wellbeing often suffered.  He designed critical illness cover to help patients cope with the monetary costs of survival.

How Critical Illness Cover Works

When taking out Critical Illness Cover you choose the payout amount (known as the sum assured) and how long the insurance should last.  For example, you might choose a 25-year policy with a sum assured of £100,000.  If you were to be diagnosed with a critical illness at any point during the 25 years, you could claim the £100,000.

There are a couple of conditions, namely there will be a monthly cost for the insurance and you must keep paying this premium in order for the cover to remain in force.  If you miss or stop payments, the cover will lapse and you will not be entitled to either a refund of premiums paid or a payout in the event of a future critical illness diagnosis.  Secondly, the insurance provider will specify a list of qualifying critical conditions.  This is usually a wide-ranging list of 50 illnesses or more, but your illness must be on their list in order to make a claim.  Some illnesses must be of a specified severity or more advanced to be eligible, for example some easily treatable forms of cancer may be excluded.

If you make a successful claim, the lump sum will be paid to you and then the policy will usually cease as most policies pay out only once.  The lump sum is tax-free so there is no need to worry about a tax bill if you need to claim.

Getting Critical Illness Cover

Critical Illness Cover is offered by various insurance providers, each of whom will have slightly different criteria when both offering cover and making a claim.  When applying you need to specify the sum assured and term you want, and provide details of your medical history.  The insurer will then provide a quote for your monthly premium.  As this can vary between providers it is advisable to compare quotes from a range of providers. 

As an independent financial adviser we can search the market on your behalf and find the most appropriate contract for you, including advising on the level of cover and duration required.  For more information please contact Richard Higgs CFP FPFS on 0117 966 5699 or

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