Glossary of critical illness cover terms

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Additional critical illness benefit

Most critical illness policies come with a list of ‘core’ and ‘additional’ illnesses covered – known as the core critical illness benefit and additional critical illness benefit. Additional illnesses are usually less severe. If you’re diagnosed with an additional benefit illness, you’ll only receive a proportion of your cover amount – usually 25% or £25,000 (whichever is lower).

Your critical illness policy doesn’t end after making an additional benefit claim; in fact, you can make multiple additional benefit claims while you’re insured (though not for the same illness twice). And you can still claim your core policy benefit, even if you’ve previously claimed the additional benefit.

Broker

A broker acts as an intermediary between buyer and seller. In the insurance world, this means between the consumer and the insurer. It could be an individual or a company. At Anorak, we’re an independent online broker for life insurance, income protection and critical illness cover. We have access to the whole market of insurers – and we work for you, not them.

Claim

An insurance ‘claim’ is the process of requesting payment from your insurance provider because the event that you’re insured for has happened. In the case of critical illness cover, the claim would be made by you in the event that you were diagnosed with one of the illnesses or conditions listed in your policy.

Core critical illness benefit

Most critical illness policies come with a list of ‘core’ and ‘additional’ illnesses covered – known as the core critical illness benefit and additional critical illness benefit. The core benefit illness are the most severe. If you’re diagnosed with a core benefit illness, you’ll receive your full cover amount as a lump sum – after which, your policy ends.

Cover

Having ‘cover’ in place means an insurer has taken on the risk of something happening to you, and that they’ll pay out if it does. Your cover ‘amount’, is how much you’re covered for – i.e. how much your insurer would pay out if the event happens. For critical illness, the event is you being diagnosed with one of the illnesses or conditions listed in your policy, and the cover amount is paid out as a lump sum.

Children's critical illness cover

Many critical illness policies will also cover your children at no extra cost. The list of illnesses covered for your children will either be the same as the adult list, or the same as the adult list with some exclusions. Many policies will also cover a list of child-specific illnesses, like Down’s syndrome or cystic fibrosis.

If your child is diagnosed with one of the children’s illnesses or conditions listed in your policy, the children critical illness benefit will be paid out. This will be a proportion of your cover amount – usually 50% or £25,000 (whichever is lower). You’ll still be insured after making a child benefit claim; and you can still claim for a core benefit or additional benefit illness in the future.

Combined critical illness cover

Combined critical illness cover is a policy that combines critical illness insurance and life insurance. With combined cover, you’re covered in case of both illness and death – whichever happens first. Remember: it only pays out the core benefit once, so if you claimed for a severe critical illness, you’d no longer be covered in case of death.

Critical illness cover

Critical illness cover is an insurance policy that pays out a lump sum if you’re diagnosed with one of the illnesses or conditions listed in your policy. It’s often bought at the same time as life insurance, since many insurers offer combined products – the idea being that you’re covered for both death and illness with one policy.

Employee benefits

Many employers offer employee benefits to their employees. This usually means benefits or compensation beyond your normal salary and could include things like employer sick pay or death in service cover.

Employer sick pay

Many employers will include employer sick pay (sometimes called ‘company’ or ‘occupational’ sick pay) in your employment contract. The terms can vary, but it usually means you’ll be paid your normal wages if you’re off sick, up to a maximum number of weeks, followed by a reduced proportion of your wages, again up to maximum number of weeks.

Many employers will automatically pay sick pay for up to a week of you being off sick, but beyond that point will require you to be signed off work by a GP. If you still can’t work after your employer sick pay runs out, you’ll be entitled to statutory sick pay for a maximum of 28 weeks.

Exclusions

Insurance policies can come with ‘exclusions’ – which means circumstances in which they won’t pay out. Some exclusions always come with the policy and apply to anyone who takes it out; others may be added by the insurer based on your particular circumstances at the time of taking out the policy (e.g. your health history, job or lifestyle).

Existing medical conditions

An existing (or pre-existing) medical condition is one that you already have at the time of taking out an insurance policy. This is important in the case of critical illness cover because having an existing medical condition could affect how much of a risk you are to insure. An insurer may charge a higher premium, add an exclusion, or refuse your application based on you having an existing medical condition, depending what it is and how severe it is. You will be covered for an existing medical condition unless your insurer specifically excludes it.

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Guaranteed premiums

A premium is the monthly price you pay to be covered by an insurance policy. If you have ‘guaranteed premiums’, this means your premiums are guaranteed to stay the same (or go up at a guaranteed rate) for as long as you hold the policy. The alternative to guaranteed premiums are reviewable premiums, which are reviewed at intervals throughout the policy. With reviewable premiums, you won't know at the time of taking out the policy how expensive they could become.

Index-linked cover

When you take out critical illness cover, you can choose to 'index link' your cover – also known as 'indexation'. This ensures the value of your cover (i.e. the lump sum that would be paid out if you were diagnosed with a critical illness) goes up in line with inflation. If you choose indexation, your monthly premiums will also increase with inflation.

Insured

The ‘insured’ is a technical way of referring to the person who is insured by an insurance policy. Sometimes called the ‘policyholder’. It’s likely you’ll see this in your policy documents.

Income protection insurance

Income protection is an insurance policy that pays out a monthly amount if you can’t work for medical reasons. If you’re signed off work by a medical professional, you can claim on your income protection policy. You can’t claim if you’ve lost your income for any other reason – like redundancy.

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Life insurance

Life insurance is an insurance policy that pays out a tax-free lump sum if you die. It’s designed to financially protect the dependents you leave behind. Different types of life insurance include: term life insurance, whole-of-life insurance, and over-50s life insurance.

Misrepresentation

Misrepresentation is a common reason for a critical illness insurance claim not being paid. It simply means not being honest during the application process. It’s very important to be honest about your health and lifestyle when you apply, otherwise you risk invalidating your policy.

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Payment protection insurance

Payment protection insurance (PPI) is an insurance policy designed to cover specific loan or finance repayments in case you can’t work due to redundancy, illness or injury. It only provides short-term cover and, unlike income protection, it’s not medically underwritten when you take out a policy. This means it can be easy to take out payment protection insurance, but sometimes difficult to claim.

Payout

An insurance ‘payout’ is the money paid out by the insurer if you make a successful claim. You should receive your payout if the thing that you’re insured for happens. In the case of life insurance, the lump sum payout is made if you die during your policy term.

Policyholder

The ‘policyholder’ is simply the person who holds the insurance policy. In other words, the person who is insured by the policy. The policy will pay out if the event that’s covered (e.g. critical illness) happens to the policyholder.

Premium

An insurance ‘premium’ is the monthly price you pay to be insured. For critical illness cover, these can either be guaranteed or reviewable. A guaranteed premium will always stay the same (or go up at a guaranteed rate) for as long as you hold the policy; a reviewable premium will be reviewed at regular intervals, so you won’t know how much it’ll cost in the future when you take out the policy.

Premium loading (or rating)

If an insurer adds a premium loading or rating to your critical illness insurance policy, it means your monthly premiums will be more expensive than they would normally be. They'll add a loading if they think you're more of a risk to insure than someone else of a similar profile – e.g. because you have a particular health condition or you have a risky hobby.

Quote

An insurance ‘quote’ is an estimate of how much it might cost you to be insured with a particular policy by a particular insurer. Specifically, it’s an estimate of what your monthly premiums would be. To make the quote as accurate as possible, it’s based on the information you provide about you, your health and lifestyle, as well as the insurer’s current rates. You’ll get a final price once your application goes through the underwriting process.

Reviewable premiums

A premium is the monthly price you pay to be covered by an insurance policy. If you have ‘reviewable’ premiums, this means your premiums will be reviewed at regular intervals through the duration of your policy. You won’t know when you take out the policy how little or how much your premiums will change in the future.

Standalone critical illness cover

Standalone critical illness cover is an individual insurance policy that covers you for the illnesses or conditions listed in your policy. The alternative to standalone cover is combined cover, which covers you in case of both illness and death (as it’s a combination of critical illness cover and life insurance).

Standard critical illness cover

Some insurers offer just one critical illness policy, while others offer standard and upgraded policies. The main way to differentiate between these policies is by the number of core and additional benefits covered in each.

Statutory sick pay

If you’re employed, you’re entitled to statutory sick pay (SSP) if you’re off work for medical reasons. It’s currently £95.85/week (true as of April 2021), paid by your employer, and can be claimed for a maximum of 28 weeks. You’ll start receiving it after your employer sick runs out or, if you don’t have employer sick pay, after being off for 4 days.

Sum assured

‘Sum assured’ is the technical way of referring to the amount of cover you have in place through your critical illness policy. It’s also the amount of money that the insurer would pay out as a lump sum if you were diagnosed with one of the illnesses or conditions listed in your policy.

Term

When you buy critical illness cover, the policy ‘term’ is how long you’ll be insured for – e.g. 10, 20 or 30 years. You choose the term when you buy the policy and it will pay out if you’re unable to work for medical reasons during that time. You can make multiple claims during your policy term, if you need to.

Terminal illness benefit

Terminal illness benefit is a feature of some life insurance policies. It simply means the policy will pay out early if you’re diagnosed with a terminal illness (i.e. a doctor states that you have 12 month or less to live). This is not the same as critical illness cover – which is its own insurance policy that pays out if you’re diagnosed with one of the illnesses or conditions it covers.

Total permanent disability benefit (TPD)

Total permanent disability benefit is a feature of some critical illness policies. If your policy has TPD, you can claim your critical illness lump sum if you become permanently disabled through illness or injury during your policy term.

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Underwriting

Underwriting takes place when you apply for an insurance policy. It’s the process of an insurance company assessing how much of a risk you are to insure – in other words: how likely it is that you’ll need to make a claim and that they’ll need to pay out. An underwriter is responsible for evaluating this risk and deciding whether or not to accept your application, under what terms, and how much it’ll cost.

Upgraded critical illness cover

Some insurers offer just one critical illness policy, while others offer standard and upgraded policies. The main way to differentiate between these policies is by the number of core and additional benefits covered in each.

Waiver of premium

When you buy a critical illness insurance policy, you agree to pay a monthly premium for as long as you hold the policy. If your policy has waiver of premium, it means you’ll be exempt from paying your monthly premiums if you can’t work for medical reasons. Insurers usually impose a waiting period on this benefit – i.e. a minimum amount of time you need to be off ill or injured before you can waive your premiums.