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Critical illness insurance : An overview
Why should you buy critical illness insurance cover?
If you, or those who depend on you, would face financial difficulties if you became critically ill (if you had cancer, a heart attack or a stroke), you may want to consider taking out critical illness cover.
When you are critically ill, the last thing you need is any financial worry like the fear of losing your home because you cannot pay your mortgage.
You can use the money you get from a critical illness cover claim however you wish. You may pay off your mortgage, pay for medical treatment, make changes to your home, pay for your living expenses or take a final holiday.
For most people, a serious illness that stops income is a major financial problem. Many homes rely on two incomes to sustain a decent standard of living. That standard could be shattered if one income suddenly disappeared for good.
In the past, many serious illnesses lead to death, and life assurance was, and still is, a sensible precaution. Advances in medical technology are happening very fast. What could have once been fatal is not always so now.
75% of people now survive a stroke. Unfortunately, 60% of stroke victims are left with a disability.
Cancer victims are now more likely to survive, and survive for a longer time, than a few years ago
If you suffer a major illness, you may not be able to go back to full time work. You may be unable to work at all. You may have to go part time or do a less strenuous job than before.
The chances of developing cancer before you reach 75, is one in three. There are now over 800,000 people living who have survived a heart attack.
As well as reducing income, a major illness may have extra costs such as a wheelchair, stair lift, or home alterations.
What do you get?
The insurer only covers the critical illnesses defined in their policy and no others.
There are many different critical illness policies on the market, often offering apparently similar cover.
They are never identical
The Association of British Insurers (ABI) has published standard definitions for the 23 illnesses most commonly covered by insurance companies, as well as the policy exclusions often used. These are contained in the ABI Statement of Best Practice for Critical Illness Cover.
ABI literature and a lot of what you read elsewhere will suggest that all insurers now use these standard definitions.
Sadly, that is not true.
Insurers can use' alternative wordings ' which provide equivalent cover.
Several insurers, most of whom are not in the ABI, do not comply with the minimum requirements.
Even if an insurer is in the ABI, there may be a special bank or building society deal, which means that the minimums do not apply.
Another way round the minimum standards is to offer a special policy such as just for cancer. These do not have to use the ABI definitions.
An insurer may offer the minimum illnesses, but only on a pick and mix select basis.
No two policies are alike; each insurer has their own list of covered illnesses. Some policies only cover a few. Some allow you to choose which ones to protect.
Which Critical Illnesses are covered?
Different policies cover different critical illnesses.
Each policy will only cover the conditions set out in the product literature
Most policies will cover the three major risks;
- Cancer – excluding less advanced cases
- some types of cancer are not covered.
- Heart attack – of specified severity
- Stroke – resulting in permanent symptoms
The ABI Definitions
These are the illnesses that members of the ABI should cover;
They are guidelines only- not enforceable at law, by regulators or the ABI. The ABI is an insurance trade association, not a consumer body.
- Alzheimer’s disease before a specified age (usually 60 0r 65 ) resulting in permanent symptoms
- Aorta graft surgery for disease
- Benign brain tumour resulting in permanent symptoms
- Blindness permanent and irreversible
- Cancer excluding less advanced cases
- Coma resulting in permanent symptoms
- Coronary artery by-pass grafts with surgery to divide the breastbone
- Deafness permanent and irreversible
- Heart attack of permanent severity
- Heart valve replacement or repair
- HIV infection caught in the UK from a blood transfusion, a physical assault or at work in an eligible occupation
- Kidney failure requiring dialysis
- Loss of speech – permanent and irreversible
- Loss of hands or feet permanent physical severance
- Major organ transplant
- Motor neurone disease before a specified age and resulting in permanent symptoms
- Multiple sclerosis with persisting symptoms
- Paralysis of limbs
- total and irreversible
- Parkinson’s disease
- before a specified age and resulting in permanent symptoms
- Stroke
- resulting in permanent symptoms
- Terminal illness
- Third degree burns covering 20% of the body’s surface area
- Traumatic head injury resulting in permanent symptoms
Other Illnesses
There are a lot of other illnesses that specific insurers choose to cover.
Some of these are useful and based on actual cases
Others are little more than window dressing as few people ever catch that illness
What is not covered?
Again, this varies by insurer
The ones that apply to almost every policy are;
- Alcohol or drug abuse
- Criminal acts
- Flying
- Hazardous sports and pastimes
- HIV/AIDS
- Living abroad
- Self-inflicted injury
- Unreasonable failure to follow medical advice
- War and civil commotion
As these are so common , we do not mention them on product profiles
The cost of critical illness cover
You pay a monthly or annual premium.
Cost depends mainly on:
- The level of benefit you select. The higher the benefit , the higher the premium.
- Your age at the time you start the policy. Older people are more likely to suffer a critical illness, so pay more.
- Your health at the time you start the policy. If you have existing health problems you might be refused cover or have to pay more.
- The health of close family. If there is a family tendency towards any of the critical illnesses, you might be refused cover or have to pay more.
- Hobbies and lifestyle.
- Whether or not you are a smoker. Smoking makes you more likely to suffer a critical illness, so you will pay a lot more.
- Sex – whether you are a man or a woman
Variations
Two main types of critical illness cover are available.
- Life and critical illness cover - pays out a lump sum if you either die or are diagnosed with a critical illness.
- Stand alone critical illness cover - pays out a lump sum if you are diagnosed with a critical illness and survive for at least 28 days.
An increasingly common variation is Cancer cover ; only covers cancer.
This often specifies which cancers are and are not covered, and the cover usually differs between men and women
Most critical illness covers pay out a lump sum benefit.
A variation is to have the benefit paid as a regular income for a set number of years.
There are some unusual covers around
e.g. Treatment cover ; pays for treatment in the USA.
You should also think about how long you want the cover for. You can choose cover for a set number of years, perhaps until your mortgage is paid off. Or you can choose a policy that has no fixed period, so you can keep the cover for as long as you need it.
Many policies automatically provide some critical illness cover for your children. If you have a family, you may want to consider a policy with this benefit.
Who can buy cover
There is usually a minimum age of 18
Most have a maximum age to tie in with retirement ages of 60 or 65
A number are now offering cover for those up to 70 or 75
There is a catch to buying cover if you are 60 or over. Some covers such as Parkinson’s Alzheimer’s and Motor Neurone Disease –only apply if caught before age 60 or 65 .
If you are suffering from, or have suffered from, a serious illness, you may not be able to take out a policy.
Or you may be able to buy a policy that does not cover any critical illness directly or indirectly related to your illness, or a policy charging a higher premium.
You may also have to pay a higher premium if certain conditions, for example, heart disease or cancer, run in your family. This is because you may be more likely to suffer a critical illness.
Can I increase my cover after the policy starts?
Some insurance companies allow you to increase your cover to keep up with inflation or after certain events – for example, if you get married.
If you take up these options, your premium will increase to pay for the increased cover provided.
Others offer inflation linked cover.
Other insurance companies may allow you to increase the cover at any time, but you will generally need to provide up-to-date information (for example about your health) before the insurance company decides whether you can have the extra cover.
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Featured providers
The following providers of critical illness insurance offer advice and quotes online or over the telephone.
MoneySupermarket
Let the experts at MoneySupermarket find the right travel health insurance for you at the right price.
Compare critical insurance policies...
Compare critical insurance policies...
PHA Insurance
You can choose a fixed premium now if you prefer and lock the insurance premium rate for the whole term of the cover.
Get a quote from PHA Insurance for critical illness insurance...
Get a quote from PHA Insurance for critical illness insurance...