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How much critical illness cover do I need?

We explain the best ways to work out how much critical illness cover you really need and important things to think about

A photo of Grace Lynch, the author

By Grace Lynch

Published on: 13 July 2023

4 min read

How much critical illness cover do I need?

Critical illness cover is a useful policy that provides extra financial protection if you were to be diagnosed with a serious illness. The policies can be adjusted to provide different levels of cover with a range of options available. People often ask how much critical illness coverage they actually need.

You should think about all the key expenses for your household such as mortgage or rent payments and utility bills. If your condition is serious, you may need to make changes in your home to improve your quality of life. However, these changes can be expensive.

It is important not to take out too much cover and risk this becoming unaffordable long term. However, you also shouldn’t take out a lower cover amount than you realistically need and then struggle financially if you do become ill.

SUMMARY: Critical illness cover can be a great option to help you with important expenses if you develop a serious or life changing medical condition. There are a lot of factors to consider when working out how much cover you need, and which insurer will work best for you.

More about critical illness cover:

Your ‘cover amount’ is how much your insurer could pay out to you if you are diagnosed with a critical illness that is covered by your policy.

This can be more complicated with critical illness cover compared to life insurance or other insurance policies. With critical illness cover, you might not always be eligible to receive the full amount you are insured for. Often, insurers will offer additional (partial) payments for certain conditions.

Whether you are paid the full amount, or a partial payment will depend on:

  • The medical condition: certain medical conditions will not qualify for a full (100%) pay out, especially conditions that are not deemed as serious or life changing
  • The severity of your condition: many insurers will decide how much to pay out based on how severe your symptoms are, assessing claims on a case-by-case basis
  • The insurance provider: all insurers will work slightly differently and will cover a different number of conditions. This means you could qualify for a pay out (full or partial) with one insurer where you wouldn’t with another.

Working out how much critical illness cover you need

There are a few key things that need to be thought about when deciding how much critical illness cover you need.

Think about:

  • Cost of critical illness cover (how much can you afford to pay?)
  • Your mortgage or rent payments
  • Any regular expenses such as car finance or phone contract
  • Debts that need to be regularly repaid
  • Household bills and general cost of living
  • Potential cost of home adaptions or private medical treatment (if needed)
  • Workplace sick pay and support (will this be sufficient?)
  • Will your partner also need time off work to take care of you?

You also have several policy options to choose from:

  • Level term: this is classed as ‘family protection’ and your premium (monthly payment) and cover amount won’t change during your policy term.
  • Decreasing term: this is classed as ‘mortgage protection’ and the amount you are covered for will decrease as you repay more of your mortgage.
  • Increasing cover: some insurers will be able to offer increasing cover. This can either be index linked meaning it rises in line with inflation or it will increase by a set percentage each year.

The term ‘critical illness’ refers to a serious medical condition that will have a significant impact on your day to day life. Some of these conditions will be ones you could recover from in time (e.g. cancer, stroke or major organ transplant) or an illness that is lifelong(e.g. permanent disability).

Critical illness cover policies will vary in the amount of critical illness conditions covered, depending on the insurer you choose. There are 36 main illnesses or disabilities that will be covered by most policies including:

Learn more – What are the 36 critical illnesses?

There are some insurance providers that will pay out for a much larger number of medical conditions (e.g. Vitality) and there are some that will offer budget options to suit different incomes and needs. You should choose the insurer and level of cover that feels right to you.

You can add critical illness cover to your life insurance policy. It is commonly offered with term life insurance.

Is critical illness cover worth it?

There are a lot of advantages to critical illness cover such as:

  • Pays out a tax free cash lump sum to support you financially
  • Able to afford important financial commitments if ill health leaves you unable to work
  • Range of insurers offering critical illness cover
  • Different policies and levels of cover available
  • Peace of mind that you have extra financial protection in place

There some disadvantages though:

  • Not all illnesses are covered no matter what policy you choose
  • You need to meet specific definitions to qualify for a pay out
  • Monthly premiums can be more expensive for people who are older or have medical conditions

Whether it is worth buying critical illness cover will come down to personal opinion. If you have sufficient savings or sick pay to support you, you may decide critical illness cover isn’t worth it for you.

If you have no or limited savings, critical illness cover can be extremely useful and can help you to avoid significant financial difficulty. There are also other types of insurance that can be helpful in this situation such as income protection insurance.

For more information about critical illness cover, you should speak to an insurance expert for proper advice. If you aren’t 100% sure of what cover you need or which insurer to choose, they can offer free advice and support.

Note: You always have the option to cancel your policy if you decide it isn’t right for you at a later point. You are never tied into any insurance policy indefinitely and have the right to cancel for any reason.

Resources

Citizen’s Advice – Critical illness insurance

Office for National Statistics – UK health indicators: 2019 to 2020

Public Health England – Health profile for England 2021

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