Updated: August 22, 2019

Life and Critical Illness Insurance

Considering adding critical illness cover to your life insurance policy? In this article we look at the benefits of combined protection and why you might consider it

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: August 22, 2019

In the UK, many people opt to take out critical illness cover to protect their loved ones in the event of them taking ill and being unable to work. This type of policy is commonly taken out alongside life insurance.

Many providers give you the option to take out a combined life and critical illness insurance plan, which often tends to work out cheaper than two individual policies, making it a popular choice.

However, combined plans don’t always offer the same benefits you’d expect from separate insurance policies.

Combined life insurance and critical illness cover explained

Combined (or joint) critical illness and life insurance protects you in the event of you being affected by a specified illness, or if you pass away.

So, if you are diagnosed with a critical illness outlined in your policy, you will receive a lump sum to help with living costs, as well as towards any medical expenses.

Likewise, in the event of your death, your critical illness and life insurance will payout to your beneficiaries if you pass away during the policy term.

When you combine your life and critical illness insurance policies into one package, you are usually limited to one payout. So, if you claim for critical illness, your life insurance cover will typically end.

However, there are some exceptions to this, which we’ll be discussing in more detail later on.

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What’s the difference between the two?

Life insurance doesn’t automatically cover critical illness. The two are separate products, which is why critical illness cover is such a popular add-on to a life insurance policy.

Life insurance pays out a cash lump sum to any dependents if you pass away during the term. It provides you with the peace of mind that your loved ones will be protected if you’re no longer there to provide for them.

Critical illness cover pays out a lump sum in the event of you being diagnosed with a serious illness which is outlined in your policy, but not in the event of death. This money can be put towards living costs, as well as any medical expenses.

Can I get critical illness cover without life insurance?

Yes, it is possible to take out standalone critical illness cover, but it may not be the most cost-effective option.

Many insurance providers receive tax benefits from life insurance policies, meaning that it may actually be more affordable to take out combined cover than it would if you opted for critical illness insurance alone.

Contact us and we’ll match you with one of the independent advisors we work with. They will be able to compare quotes for standalone versus combined life and critical illness insurance, saving you time and hassle.

All the experts we work with are independent financial advisors who can scour the whole market to find the most competitive and suitable deals for your circumstances.

What does combined insurance cover me for?

As with all insurance, what is covered by your policy will depend on the terms of your combined life and critical illness cover plan.

With life insurance, if you pass away while your policy is active, your loved ones will receive a pay-out in the event of your death.

If you become critically ill during the period, what’s covered will depend on what has been stipulated in the terms. Standard policies cover a range of conditions, whereas a bespoke policy will cover what you’ve opted to include in your package.

Can I get life insurance with critical illness cover and income protection?

Life, critical illness and income protection are the three key types of “protective” insurance cover, and it is certainly possible to take out a policy that encompasses all three.

Income protection pays out a regular income in the event that you’re signed off work for any medical reason that prevents you from being able to work.

It’s a popular add-on to life insurance because it covers a broader range of less serious medical ailments, unlike critical illness cover which only pays out for more severe, debilitating conditions.

Can I get life and critical illness insurance if I’m unemployed?

It may be possible to get life and critical illness insurance if you’re unemployed, but some insurers may decline your application – again, it all depends on the circumstances.

The main reason you may be declined is if there is insufficient evidence to suggest that you will be able to afford the monthly premium. After all, it costs insurance companies money to put your policy into effect.

However, if you’re only temporarily unemployed, perhaps if you’ve recently been made redundant or between jobs and are actively seeking another (and can back up such claims), you may stand a better chance.

Alternatively, if you’re able to demonstrate financial strength, for example, if you have a solid amount of savings (again, with evidence), it may instil greater trust in providers. A low level of debt and a good credit score is also likely to help your case.

To discuss your situation in more detail, the insurance experts we work with are more than happy to help – give us a call on 0808 189 0463 or submit an enquiry online.

What is the average cost of combined insurance?

The cost of life and critical illness cover is highly dependant on a number of factors, including:

However, your monthly premiums are likely to be cheaper with a combined plan than they would be if you had two separate policies, because if you make a critical illness claim during the period, life insurance coverage will usually cease.

Of course, the quotes you receive will also vary by insurer, which is why it’s so important to compare costs across the market.

This is where we can help. Get in touch to speak to a whole-of-market insurance expert who can carry out a comparison to get you the most competitive quotes, bespoke to your needs.

Should I get life and critical illness insurance as a combined policy?

Having two separate policies will provide you with the peace of mind that you’ll be taken care of if you’re too ill to work, and that your dependants will be looked after financially if you were to die unexpectedly.

However, combined policies are often cheaper, so it may be the only option if funds are limited. What’s more, there are some combined policies that will continue your life cover even if you make a critical illness claim.

However, it may be the case that such policies are more expensive than other combined plans so as to compensate for this. Speak to an expert to find out which insurers treat the two coverages as separate, and compare the costs.

Do I choose level or decreasing term life insurance combined with critical illness cover?

‘Level term’ insurance covers you for a sum that remains the same throughout the duration of the policy. This means that the price you pay won’t change over time, nor will any payouts you and/or your beneficiaries receive.

‘Decreasing term’ insurance is paid over a fixed period of time. The level of payout you receive will decrease over the length of the policy. Because of this, monthly premiums can be lower as the amount an insurer may need to pay out to you reduces over time.

One reason why some may opt for decreasing term life insurance with critical illness cover is because, should you pass away in 10 years as opposed to 20, you would receive a larger payout.

Is critical illness and life cover for a mortgage recommended?

Many experts recommend taking out mortgage protection life and critical illness cover for your own protection.

Considering that a mortgage is likely to be your biggest financial outgoing, it’s reassuring to know that your repayments will be taken care of in the event of death or you becoming critically ill and unable to work.

Decreasing term life and critical illness cover is a common option used to cover the balance of a repayment mortgage, as this type of loan will also decrease over time.

Should I get whole-of-life critical illness and life insurance combined?

Instead of ‘term insurance’, you may opt to take out a “whole-of-life” critical illness and life insurance policy.

Term insurance is nearly always a cheaper option, which is why it’s so popular. However, whole-of-life insurance with critical illness cover may be more suitable for you if, for example, you want to help cut your family’s inheritance tax (IHT) bill.

This is because IHT is charged at 40% on all your assets which exceed the value of £325,000, which includes property.

By taking out a whole-of-life policy and writing it in trust so that the proceeds are paid to the beneficiaries of the trust rather than going in to your estate, your dependants should receive a tax-free lump sum, which can be used to pay the IHT on your estate.

How to find the best combined cover

The best combined life insurance and critical illness cover policy for you will be entirely dictated by your personal circumstances and needs.

While comparing the market for competitively-priced life and critical illness insurance, it can be tempting to opt for the cheapest cover out there, and many online comparison tools will emphasise low price over anything else.

However, just because something is cheap doesn’t necessarily mean it’s the best, so it’s crucial that you explore all your options and find out the exact terms of your policy before committing to anything.

The good news is that there are some very reasonably priced policies available for both critical illness and life cover – both combined and separate. The trick is knowing where to find the best deals.

Speak to an expert to compare quotes

Taking out combined life insurance and critical illness cover can be a tempting prospect, but don’t forget the significance it has on your future.

We can provide you with competitive quotes on both a separate and combined basis.

The whole-of-market experts we work with will assess your individual requirements, and carry out a comparison on the most suitable cover to suit your needs as well as your budget.

Get in touch with us on 0808 189 0463 or submit an online enquiry. We only work with 5* accredited advisors, we don’t charge a fee, and there is no obligation on your part to make a purchase.

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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