Critical illness cover

A lump sum on diagnosis of a specified serious condition. The definitions are the product.

Critical illness cover pays a tax-free lump sum if you're diagnosed with one of the conditions listed in the policy and survive a short period afterwards, typically ten to fourteen days.

It's useful, it's expensive relative to life cover, and it's the product where the small print does more work than anywhere else in protection.

What it's for

The lump sum isn't tied to any particular use. In practice it's spent on:

Clearing the mortgage, removing the biggest fixed cost while you recover
Adapting a home after a life-changing diagnosis
Replacing a partner's income while they care for you
Private treatment or drugs not routinely funded
Simply not having to think about money during the worst year of your life

The definitions are the product

Two policies both covering "cancer" and "heart attack" can behave completely differently.

Most conditions are defined against ABI model wordings, which set a minimum standard and make comparison possible. Many insurers cover more than the model wording requires, and the differences are where the value sits.

Cancer is the biggest source of claims and the biggest source of variation. Policies typically cover invasive cancers of a specified severity, and treat less advanced cancers differently — often paying a partial amount rather than the full sum. Early-stage prostate cancer and non-invasive breast cancer are common examples.

Heart attack and stroke definitions require specified evidence and a certain level of severity. A minor event may not meet the definition.

Severity-based cover is increasingly common: rather than paying in full or not at all, the policy pays a percentage matched to how serious the condition is. It reflects reality better than an all-or-nothing structure, but makes comparison harder.

Partial payments for less severe conditions usually don't end the policy — the remaining cover continues.

The number of conditions covered is the metric most commonly advertised and the least useful. A policy covering forty conditions with strong definitions beats one covering ninety with weak ones. Almost all claims come from a handful of conditions.

Total permanent disability

Usually included, and defined either against your own occupation or against activities of daily living. The difference is large, and the own-occupation version is significantly more valuable.

Children's cover

Most policies include cover for children as standard, paying a smaller sum on a child's diagnosis. The age ranges and conditions vary, and it's one of the more genuinely valuable inclusions — the cost of a seriously ill child is usually a parent stopping work.

Critical illness or income protection?

If you can only afford one, this is the question.

Income protection covers any illness or injury that stops you working, for as long as it stops you. It responds to the most likely scenario — a long absence from work — regardless of the diagnosis.

Critical illness pays only for listed conditions, but pays a lump sum even if you make a full recovery and return to work.

For most working people with a mortgage and no other cover, income protection does more. Critical illness suits someone who wants to clear the mortgage on a serious diagnosis, or who already has good employer sick pay covering the income risk.

Buying both is common where budget allows, and combining life and critical illness in one policy is cheaper than buying separately — though usually on a "pays once" basis, meaning the critical illness claim ends the life cover.

Standalone or combined

Combined with life cover is cheaper but generally pays once. Claim on critical illness and the life cover goes.

Standalone costs more and keeps the two independent, so a critical illness claim leaves life cover intact for your family later.

Which is right depends on whether the life cover is doing an essential job that has to survive a critical illness claim.

Before you buy

Read how the policy defines the conditions you're most worried about — usually cancer, given it drives most claims. Ask specifically how less advanced cancers are treated.

Check whether total permanent disability is own occupation or activities of daily living.

And treat the number of conditions in the marketing as noise.

This article is for general education only and isn't personal advice or a recommendation of any product. Policy definitions vary substantially and determine whether a claim succeeds — worth having the wording read properly.