As with any insurance policy, there are pros and cons to taking out critical illness cover. Whether it’s right for you depends on your circumstances and what you’re trying to achieve. We’ll guide you through some of the pros and cons below – but feel free to take our assessment or get in touch if you want to know more.

Critical illness insurance: the pros

It pays out a tax-free lump sum

Critical illness cover is an insurance policy that pays out as a lump sum if you need to claim. This gives you an immediate cash injection, which can be used however’s needed in your circumstances.

People often use a critical illness payout to support themselves financially while they take time off work to recover or adjust. It could also come in handy if you need to pay for medical expenses or make any changes to your home, depending on what you’ve been diagnosed with.

It pays out straight away

If you’re diagnosed with one of the illnesses or conditions in your critical illness policy, the lump sum will be paid out straight away. It gives you an immediate financial cushion at a difficult time. This makes it different to other illness insurance, like income protection insurance, which comes with a waiting period, and won't start paying out until your waiting period has elapsed.

It could be more relevant than life insurance

People of working age are more likely to get ill than to die, so protecting yourself in case of illness could actually be the priority for you. It’s a good idea to work out what the financial consequences of both scenarios would be in your circumstances to decide which kind of cover is more relevant for you.

But can also be combined with life insurance

If you decide you’d like to be protected in case of both death and illness, many insurers offer combined life insurance and critical illness cover policies. The thing to bear in mind with a combined policy is that it’ll only pay out the main benefit once; so if you claim for a critical illness, your policy will end and you won’t be covered in case you die.

And you could be covered if your children get ill too

You can often add children’s cover to your critical illness insurance policy at no extra cost. Your children will then be covered for the same list of illnesses as you, and maybe some child-specific ones too, depending on the insurer. Child illness claims only pay out a proportion of your cover amount, but after that your cover remains in place (so you’re still insured and claim again in the future).

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Critical illness insurance: the cons

You’re not covered for every illness or injury (only the ones in your policy)

Insurers will only pay out if you’re diagnosed with one of the illnesses or conditions listed in your own critical illness insurance policy. This varies from insurer to insurer, so it’s important to check what these are before you buy. Some illnesses might be more relevant for you based on your profile or health history, which might make one critical illness policy more suitable for you than another.

You’re only covered if you meet the insurer’s severity threshold

As well as the list of illnesses covered, insurers also specify in a critical illness insurance policy how serious the diagnosis needs to be for a valid claim. For example, an insurer might only pay out for a stroke if it results in permanent symptoms; for cancer if it’s at a certain stage; or for kidney failure if it requires dialysis. Each illness covered by your policy will be accompanied by this kind of threshold.

It might not be affordable

Comprehensive critical illness insurance isn’t necessarily cheap – especially if you're older or if you’ve already got a health condition. It's cheapest to buy it when you're young, fit and healthy. How affordable it is for you depends on your circumstances when you take out a policy and your available budget.

Illness (and its consequences) can be hard to predict

Not knowing what will happen to your health in the future can make it tricky to choose an appropriate level of cover. The lump sum you’d need depends on the nature of your diagnosis and recovery.

A good rule of thumb is giving yourself enough of a cushion to pay your household expenses for a year or two, in case a diagnosis leaves you unable to work. Of course, the level of cover you take out needs to be balanced with how much you can afford (and are happy) to pay in monthly insurance premiums.

Should you buy critical illness cover?

Being diagnosed with a serious illness or condition can have significant financial consequences, whatever your circumstances. If you want peace of mind that getting seriously wouldn’t affect your finances, it’s a valuable kind of cover to have in place. It could make all the difference at a difficult time, especially if you have other people relying on your income – like a partner or children – giving you a safety net while you recover or adjust, so you don’t have to worry about money.

  • Critical illness cover is an insurance policy that pays out a lump sum if you're diagnosed with a critical illness
  • The lump sum payout provides financial support just when you need it, giving you time to recover or adjust without worrying about money
  • It's best to buy critical illness cover sooner rather than later, as the price goes up with age, or if you already have a health condition
  • It's important to remember that critical illness cover doesn't cover every illness out there; only the ones in your policy, and only if you meet your insurer's definition of it
  • Critical illness cover is one way of protecting yourself in case of illness, but you can also explore income protection too – which covers you for any medical reason and pays out monthly (as opposed to a lump sum payout)

This guide is intended for informative purposes only and does not constitute advice.