Updated: July 26, 2019

Is Critical Illness Insurance Worth It?

How cost effective is critical illness cover? We explore the benefits, potential alternatives, and how to seek objective guidance about the best deals

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: July 26, 2019

Every year, thousands of people become seriously unwell to the point where they can no longer work. For many, this is a scary thought. With bills to pay and families to feed, a lot of people turn to critical illness cover. But is it worth having?

To help you decide on the best course of action for you in the event of a critical or terminal illness, we’ve created this short guide.

If you want to discuss your critical illness cover with someone, the experts we work with can provide you with advice tailored to your personal circumstances.

Is critical illness cover necessary?

Many people have benefited from having critical illness insurance to cover them financially in the event that they cannot work. No one can predict whether or when they may fall critically ill, though you can take steps to prepare yourself financially.

Those who do fall ill with a critical condition may be worried about being unable to work. For example, if someone suffers a stroke and they have months off work, they should be focusing on their recovery and not worrying about how to meet the bills.

Many people might also not be in a position to have savings that can cover the shortfall of income during a period of sickness. Unfortunately, an estimated 10 million households in the UK have no savings at all, so if you’re not in a position to comfortably afford your outgoings when not earning, critical illness insurance could be worth having.

A critical illness insurance policy that pays out a lump sum can be a huge relief. For example, if you had a 25-year policy at £50 a month, you would have paid out £15,000 overall.

This may sound expensive, however, if you were to fall ill and make a claim, you could receive a payout in excess of £100,000, which would be significantly more than you had paid in.

It’s worth noting that every insurance provider will offer varying rates, depending on your own circumstances and this can therefore affect the amount you are insured for. Many providers also offer guaranteed premiums so you can lock the price of your insurance cover to keep the same cost, which could be handy as you enter your older years when critical illness cover may be more expensive.

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Is it worth getting cover for children?

Potentially, yes. There are insurers that also offer children’s critical illness cover and this can provide peace of mind should you have to take time off work to care for your children, in the event of an illness. Alternatively, the lump sum could go towards their treatment, if needed.

You may find that the pay out can be lower, however, there are insurance providers that offer the additional cover at no extra cost to your own cover.

Although you would hope that you never have to make a claim, if you should have to, it can be a good idea to use a portion of the funds to invest. After paying their outgoings, many parents decide to do this with intentions of generating a future income for their children.

If you would like to discuss whether critical illness cover is worthwhile for you and your family, contact an advisor.

How many times can I claim?

Another factor to consider before taking out a critical illness insurance plan is that most providers will only pay out for one claim. Therefore, if you were to make a claim and receive a payout, you may not be entitled to payment on death.

That being said, there are now a number of insurance providers that will pay out smaller payments if you are diagnosed once more with a serious illness later down the line.

Factors to consider

Having critical insurance cover provides an assurance that, should the worst happen, you are at least financially covered. However, there are also some other factors that you should consider before taking out a policy.

The cost

Getting approval for critical illness cover as well as the cost of your premiums will heavily depend on how healthy you are.

Usually, the older and unhealthier you are, the higher the premiums. This is because most providers will conclude that you will be more likely to make a claim. However, many providers offer guaranteed premiums, meaning that you can lock in your current premiums until the cover ends and keep the costs low as you get older.

You won’t get your money back if you never make a claim

If you’re fortunate enough to never be in a position to have to make a claim, it’s important to remember that the money you have paid in premiums is non-refundable and you will not be entitled to claim it back.

You can’t make a claim if you stop paying your premiums

If you stop making your insurance payments, you cannot claim under you policy. Even if you have paid for critical insurance cover for a substantial length of time, you will only be covered if you continually make payments and adhere to the terms and conditions set out in your agreement.

Are there alternative products?

It may be the case that critical illness insurance is unnecessary for you, but that’s not to say that there won’t be alternatives that would suit your situation better.

These may include:

Talk to an insurance specialist today to find out more about the alternative options that may be more financially viable or better suited to your circumstances.

Talk to an insurance expert

Taking out any insurance policy should never be a snap decision and with any financial cover, it’s best to seek advice and be certain that the cover you choose is right for your circumstances.

The advisors we work with have years of experience and have access to hundreds of insurance providers throughout the UK. They can talk you through the pros and cons of each critical insurance policy and recommend the best one based on value for money, the range of cover and the average payout.

Contact a critical insurance specialist today for free and impartial advice. Give us a call on 0808 189 0463 or fill out an enquiry form and an advisor will respond as soon as possible.

Ask a quick question

We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in critical illness cover. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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