Critical Illness Cover

A claim depends on diagnosis of a condition named in the policy document that meets the definition written there. It is not paid because you are unwell, and not because a consultant used a worrying word.

Most plans list between forty and eighty conditions, though the number is a poor guide to quality. Nearly all claims paid across the industry come from a small group, with cancer, heart attack, stroke and multiple sclerosis accounting for the large majority. A plan covering ninety conditions is not better than one covering fifty if its definitions on the common conditions are narrower.

Where the wording bites

The Association of British Insurers publishes model wordings and most insurers meet them. Some go further, using definitions described as ABI plus. Others sit at the minimum. Stroke definitions usually require symptoms persisting beyond twenty four hours, which is why a transient ischaemic attack is often excluded or paid at a reduced rate. Heart attack definitions turn on enzyme readings and evidence of damage. Cancer definitions nearly always exclude certain early stage and non-invasive tumours from the full payment.

Partial payments

Rather than pay nothing on a less severe diagnosis, most modern plans pay a percentage of the sum assured or a capped amount, often around £25,000, usually without reducing the main cover. Some insurers grade payouts by severity across a wide range of conditions. Comparing two quotations on price alone tells you almost nothing about how they behave on a real diagnosis.

Every policy has a survival period, typically ten or fourteen days from diagnosis. You have to be alive at the end of it for the benefit to be paid. Where the plan is combined with life cover the death benefit pays instead, but on a standalone plan a very short survival can mean no payment at all.

Expect exclusions for pre-existing conditions, and expect the insurer to read your medical records at claim. Disclose your full history, including anything you think minor or historic. An undisclosed symptom from years ago is one of the more common reasons a claim runs into difficulty.

Most insurers include children’s cover automatically, paying a percentage of your sum assured up to a stated maximum, often somewhere around £25,000. Children are normally covered from a few weeks or months old until their late teens, or their early twenties if in full time education.

Read what is included, because policies differ widely here. Stronger plans pay on childhood specific conditions, cover a child stillborn after a set number of weeks, and include a hospitalisation benefit. A claim of this kind is not really about the money. It is about a parent being able to stop work for six months without the mortgage becoming a second crisis.

The two are regularly confused and they do different jobs. Critical illness pays a single lump sum on diagnosis of a listed condition, whether or not you are working, and the policy then usually ends. Income protection pays a monthly income when illness or injury stops you working, whatever the cause, and keeps paying until you recover or the term ends.

Put plainly, a bad back or a long period of depression will often support an income protection claim and will rarely support a critical illness claim. A heart attack you recover from in three months is the reverse. If you can only afford one, the answer depends on your circumstances, though for an employed person with little sick pay we would usually start with income protection.

Critical illness is often added to a life policy on a first event basis. One sum assured, paid on death or on a qualifying diagnosis, whichever comes first, and the policy then ends. It is the cheaper route and it works well for mortgage protection, where the aim is to clear the debt on either event.

Separate policies, or a plan with independent sums assured, cost more but can pay twice. A critical illness claim leaves the life cover in force, which matters if the condition later shortens your life and you would struggle to buy new cover. Either version can be level or decreasing, and either can be written in trust.