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How Much Critical Illness Cover Do I Need? - Critical Illness Explained

Updated: Apr 6, 2023

Critical illness cover is a long-term insurance policy that pays out a one-off, lump sum, payment if you are diagnosed with a severe illness such as cancer, heart attack or stroke during the policy term.

How much critical illness cover do I need?

Critical illness protection is a one-off payment designed to ensure that you are potentially able to manage financially should you become ill and not be able to work.

This payment could be used for adaptation in a home to make it more accessible, becoming mortgage free taking away some of the stress, or a one-off family holiday to make family memories that won't be forgotten (depending on the amount that you ensure).

The illnesses covered and the policy definitions (when they do and when they do not pay) of critical illness can depend on the insurance company providing the cover, but there are a number of illnesses that are fairly standard across all critical illness coverage - we’ll let you know what those are later.

What is covered by critical illness, why do you need it, and how much cover will I actually need? Keep reading to find the answer to these questions and more to make sure you understand if critical illness cover is right for you.

Why do you need critical illness cover?

Critical illness cover is used to provide financial security for you and your loved ones if you were to be diagnosed with a critical illness or condition. This type of insurance is available because it’s well-known by insurance providers that a critical diagnosis can have a severe and significant financial effect on your household. Here are some common reasons why people may struggle:

  • You have to take time off work due to your illness

  • Your partner has to take time off work to support you

  • Alterations are needed in your home due to your illness

  • You may have to pay for medical care

What does critical illness insurance cover?

Critical Illness cover pays out a tax-free lump sum amount if you are diagnosed with a critical illness that is listed in your policy agreement.

There are some illnesses that most critical illness insurance will cover, but others may not include them. A policy would cover somewhere in the region of 50 illnesses depending on the insurer. Here’s a list of some of the more common illnesses you will find in critical illness cover:

  • Cancer

  • Heart Attack

  • Stroke

  • Kidney Failure

  • Multiple Sclerosis

  • Parkinson’s Disease

  • Brain Tumour (Benign)

  • Loss of a limb

  • Loss of sight

  • Loss of hearing

  • Alzheimer’s Disease

The majority of claims are made up of Heart attack, Stroke, Cancer & Multiple Sclerosis. Speak to an insurance provider to get a detailed understanding of what illnesses are included in the cover they provide.

Critical illness & Serious illness cover - What’s the difference?

Serious illness cover is an alternative to critical illness cover. It works in much the same way, except the amount paid out by the insurer depends on the severity of the illness. This means that the full sum of the insurance will only be paid out in the most severe of cases, it does however include a lot more of the less serious conditions, or less serious definitions of the illnesses covered in critical illness insurance, which means you could receive a smaller payout on something that you wouldn't receive a payout for at all with critical illness cover.

If you are worried about the limited amount of illnesses covered in critical illness insurance, then serious illness cover could be a better option for you. Some serious illness insurance policies can cover between 153 to 182 conditions depending on the level of insurance you take out, compared to around 50 conditions that are covered in most critical illness insurance policies.

How Much Critical Illness Cover Do I Need?

There are a lot of variables to consider when thinking about taking out critical illness cover, and something you might consider is how much cover you actually need.

The amount of cover you need depends on your financial situation and commitments. These are some questions you’ll have to ask yourself to figure out how much you need:

  • How much is outstanding on your mortgage?

  • How much money do you need to pay your mortgage/rent each month?

  • What medical expenses could you have to pay?

  • Do you have any other debts?

  • How much do you need to pay your household bills?

  • Do you have any savings or any other assets?

  • Do you receive any benefits?

Once you’ve taken all of that into consideration you should have a somewhat clear idea of how much you will need to continue living comfortably financially if you were to be diagnosed with a critical illness.

You’ll want to aim for something that’s affordable to you but will provide you with a lump suitable enough to cover your lifestyle. Some critical illness cover is better than none, so even if you have a cheaper policy you’ll still be thanking yourself if the situation arises and you need it.

Why Might Critical Illness Cover Not Pay Out?

There are a number of reasons why insurance companies might reject a claim, these include:

  • Withholding relevant information when you applied for the insurance

  • The condition does not match the minimum definition of the policy

  • The condition you are claiming is not on the policy.

  • Not having mentioned something that later comes to light regarding your previous medical history.

Make sure you are as honest as possible, provide your insurer with medical documents and double-check that you’re claiming for an illness or condition that’s included in the policy.

If you’re worried about your insurer not paying out, it’s important to know that insurers will pay out the vast majority of claims. In 2021, Legal & General paid out to 2,890 claimants for critical illness cover, with 93% of claims being paid.

You can see more of Legal & General’s statistics here.

Another insurance provider, Aegon, also shows that they paid out 93% of critical illness claims in 2021, and had an average payout rate of 93% over the last 3 years. Aegon says that they were unable to pay out 2% of claims due to misrepresentation, and the remaining 5% because the injured person didn’t meet the policy definition. You can read more about that here.

How Much Does Critical Illness Cover Cost?

You won’t want to rush into getting critical illness cover without knowing how much it will cost you. Like any insurance, there are a lot of variables involved in the cost of your critical illness cover.

The cost of your cover will depend on your age, the level of insurance chosen, and your medical history. Your family's medical history could also affect the terms and conditions of your policy if anyone in your family has been diagnosed with a serious illness before the age of 65.

It can be a difficult choice to find the right cover for you, but we can help to find cover that suits you and your needs.

Click the link below to get in touch and speak to one of our advisors.


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