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Critical Illness insurance is a policy designed to provide a lump sum payment to a policy holder if they are diagnosed with one of the illnesses listed in their insurance policy.
It’s important to understand that you would need to meet your chosen providers definition of the Critical Illness to make a claim on the policy.
Not all medical conditions are covered and each provider has a different amount of overall conditions covered within their policy. The ability to claim on a Critical Illness policy is not based on your ability to work, but meeting the criteria set out by the provider as specified on the inception of the policy.
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Insurance providers detail the conditions their Critical Illness policy covers in their ‘Key Features Document’ (KFD). It’s certainly worth reading through your chosen providers policy documents to get an understanding of what you would be covered for and the definition you’d need to meet if you ever need to claim.
Some providers may also pay out a smaller lump sum, known as a partial payment, should you be diagnosed with a critical illness which meets your chosen providers definition. Typically, these partial payments do not impact on your overall sum assured.
Again, it’s worth taking the time to read through your chosen insurers policy documents to get an understanding of what you are covered for and in what circumstances might the policy pay out.
Unlike life insurance, Critical Illness cover is designed specifically for serious illnesses, injuries, or disabilities rather than death.
When taking out a policy, you choose how long you want the cover to last. If you are diagnosed with a covered condition during this period, have survived for more than 14 days after diagnosis and met the insurer’s definition, the policy pays out a tax-free lump sum. Once the term ends, the policy expires and no future claims can be made.
If you are healthy, you probably won’t consider buying critical illness insurance.
However, there are a number of reasons why a critical illness plan could be suitable. If you need time off work to recover, the funds could help you pay your rent or mortgage, utility bills and day-to-day living costs, allowing you to focus on getting better.
Alternatively, if you are left physically or mentally impaired after a critical illness, like a heart attack, stroke, loss of limb etc., you may need to make adjustments to your home to make it more accessible.
Critical illness cover will also usually pay out if you die. If you have a family, or other loved ones dependent on your income and you unexpectedly pass away, they may struggle with debts, mortgage payments, funeral costs or general living expenses.
Since critical illness cover often includes serious injuries such as loss of limb, sight or deafness, it can also be valuable for people working in high-risk industries where accidents are more likely (for example: construction, mining, engineering, manufacturing).
There are two main types of Critical Illness cover:
Level Cover - The payout remains the same throughout the policy term. This is often chosen by people who want a fixed lump sum to help replace income, cover living costs, or provide financial support for their family and/or loved ones.
Decreasing cover - The payout amount reduces over time, typically in line with a repayment mortgage. Premiums are usually lower as the insured amount declines. This type of cover is suitable when you want the payout to match the reducing balance of a mortgage or loan.
There are three ways you can purchase a Critical Illness policy through Cavendish Online:
Online (via the Cavendish Online website) -
This option is available to anyone with no health disclosures, providing the amount of Critical Illness cover is the same as the amount Life cover (for example, you are unable to quote for a lesser amount of Critical Illness cover alongside your life cover).
To include Critical Illness cover online, you can select it as a ‘policy extra’ once you have received the Life Assurance quotes.
Please note that there are a limited number of Critical Illness policies and providers available online. However, a wider selection of insurers and products are available through both our guidance and advised phone-based services (please see below for more information).
Over the phone with Guidance -
If you have a good idea of the policy you’re looking for but would rather go through the process over the telephone then you may wish to speak with our Guidance team. They will provide quick quotes for you and take you through the application process once you’ve decided on the right policy.
Unlike our online route, you are able to have differing amounts of Critical Illness and Life cover when you quote through our Guidance team – though it’s up to you to decide the levels of cover you wish to secure.
Call our Guidance team now on:
01392 241 850 (Monday to Friday, 10am - 6.30pm)
Over the phone with Advice –
If you have any medical disclosures, a high risk occupation, hazardous hobbies, or are simply unsure as to which Critical Illness policy is right for you, consider giving our advised team a call.
They will spend 15 to 20 minutes (sometimes slightly longer if there is lots to discuss) getting to know you and your current situation.
Following this, they will research the market and make recommendations tailored to your specific needs. Our advised team can arrange Life and Critical Illness policies with differing amounts of cover, or even standalone Critical Illness cover if requested.
Call our Advice team now on:
01392 436 193 (Monday to Friday, 9am - 5.30pm)
Consider the following when purchasing Critical Illness insurance...
What conditions do I want my policy to cover?
What isn't covered by this policy?
How long do I want to be covered for?
Can this policy cater for changes in my life?
How much is the policy going to cost?
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This isn’t always the case, so don’t be discouraged from applying, different insurers treat applications differently. Speaking with an adviser can help streamline the process and compare the whole market.
Call our team on
01392 436 193
(Monday to Thursday 9am – 5.30pm, Friday 9am – 5pm)
The amount of Critical Illness cover you need will depend on your personal situation, financial responsibilities, and whether anyone depends on your income.
When deciding on a suitable amount, consider:
Would my family/loved ones be able to maintain mortgage or rent payments?
How long could we cope financially using savings alone?
Would my partner or dependents need ongoing support?
Do I have large commitments such as loans, childcare costs, or school fees?
Does my employer provide sickness benefits?
More cover isn’t always better.
Higher payouts usually mean higher premiums. Aim for a realistic level of protection that would remove the biggest financial pressures without straining your budget.
If you’re unsure, speaking to an adviser can help you identify a level of cover that suits your needs.
There are lots of factors that can influence the overall cost of a Critical Illness policy. Some of these include things like your age, amount and level of cover, occupation, hobbies and your ‘smoker status’.
If you’ve had or currently have a serious medical condition then you may find it more difficult to get cover than someone who has not, and the cost of policies may be raised too. This is because insurers take into account certain risk factors and the likelihood of an individual suffering a serious illness. Smoker status and family medical history can also have an impact on cost.
Those who have had or currently have a medical condition may wish to speak to an adviser. After getting to know you and your situation in a little more detail, they speak to underwriting teams on your behalf to obtain an indication of how each provider may treat an application for cover - including whether they will look to increase the premium, or place any exclusions on your policy. Based on this research, our team of expert advisers then make recommendations for your cover, tailored to your specific circumstances.
To speak to our advised team, please call:
01392 436 193 (Monday to Friday, 9am - 5.30pm)
The price of critical illness insurance varies on several factors, including age, smoking status, family history, and pre-existing medical conditions. Some conditions may increase the cost significantly or make it difficult to secure cover at all.
If you don’t want critical illness cover, you may want to consider term life insurance, which pays a lump sum on death only, usually at a lower cost. It does not pay out for illness.
If you’re unsure whether you need life cover, critical illness cover, or both, an adviser can help assess your circumstances and recommend suitable cover amounts.
The lump sum payouts resulting from a valid Critical Illness claim can be used however you and your loved ones see fit, for example:
To repay outstanding loans or debts (such as a mortgage)
To alter your current property to assist with accessibility
To pay for treatment to help you recover
To go towards moving property if required
To assist with daily living costs and general household bills
A serious illness can affect not only your health, but also your household finances. Critical Illness cover helps to provide a financial safety net, giving you and your loved ones a lump sum to help manage bills, debts, and living costs if you are unable to work.
It may also be useful if you have new accessibility needs after a critical illness - the payout could be used to help fund a home remodel or a move to a more accessible property.
It may not be necessary for everyone, however. For example, if you have no dependents or have substantial savings. But for most people with financial commitments or family responsibilities, it offers valuable peace of mind.
You may also want to consider complementary products such as income protection.
Critical Illness can be purchased online or over the phone with our Guidance or Advised teams.
Online – this option is available to anyone with no health disclosures, dangerous hobbies, or hazardous occupations (providing the amount of Critical Illness cover is the same as the amount Life cover). To include Critical Illness cover online, you can select it as a ‘policy extra’ once you have received the Life Assurance quotes.
Please note, there are a limited number of Critical Illness policies and providers available online. However, a wider selection of providers are available through our phone-based services (please see below for more information).
Over the phone - with access to all insurers and policies, purchasing a Critical Illness policy through our phone-based Guidance or Advised team is often a preferable option. Unlike our online route, you are able to have different amounts of Critical Illness and Life cover, meaning you can tailor the policy to your specific needs.
If you have a good idea of the policy you’re looking for but would rather go through the process over the telephone, then you may wish to speak with our Guidance team. They can access a panel of insurers to provide quick quotes for you and take you through the application process once you’ve decided on the right policy.
Call our Guidance team now:
01392 241 850 (Monday - Friday 10am - 6.30pm)
Alternatively, you may choose to speak with one of our advisers. If you have any medical disclosures, a high risk occupation or hazardous hobbies and are looking to secure some Critical Illness cover you should consider giving our advised team a call, as they can provide a range of options based on your circumstances, and advise you on which insurer and policy best meets your needs.
Our Advice team operate on a 'Whole of Market' basis, meaning they are not limited to using certain insurance providers when making recommendations for your cover.
Call our Advice team now on:
01392 436 193 (Monday - Friday 9am - 5.30pm)
The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit. If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.
If you are facing financial difficulty, please contact your insurer before cancelling your policy or letting it lapse. They may have options available that means you don't have to lose the plan.
Are Critical Illness payouts taxable?
If you have been paying for the cover yourself, the answer is no, you won’t have to pay tax on a payment from a Critical Illness policy in the event of a claim. In this context, a payment from a Critical Illness policy is not classed as income. This is because the money you have used to pay for the cover (your salary) will have already been taxed before you received your payslip!
Ultimately, Critical Illness insurance is designed to support you and reduce the financial shortfall you might face as a result of being diagnosed with a Critical Illness.
HOWEVER…
It’s worth knowing that there are a handful of instances where a payout from a Critical Illness policy might be taxable.
When might Critical Illness payouts be taxable?
You or your loved ones may face a potential tax charge on the policy proceeds in certain circumstances, for example:
If you make a claim on your Critical Illness policy, but do not receive the policy benefit before you pass away, the money will form part of your estate. In the 2022/23 tax year, if your estate is valued at more than £325,000, inheritance tax may be applicable on the insurance payout.
If you share the cost of the Critical Illness cover with your employer, then the tax-free proportion of the payout in the event of a claim will mirror the proportion of the premium you pay for. So, if for instance you agree to cover half of the premium cost, and your employer covers the other half; you would pay tax on 50% (i.e. half) of the pay out.
If you are unsure about the specifics of a Critical Illness policy arranged through your workplace, it may be worth contacting your employers/HR team for further information and support.
Please note that we are not tax experts. If you would like advice or further information on tax and how it affects your current circumstances, we would suggest you speak to an Independent Financial Adviser or qualified accountant.
Though this list is not exhaustive, Critical Illness policies and insurance providers often differ regarding the following:
• The amount of conditions covered (both full pay out conditions, and partial payment conditions)
• Their definitions of the conditions covered in the policy
• Additional benefits included within the policy (e.g. bereavement services, fracture cover, GP services)
• Children’s cover (the level of cover varies from provider to provider, and is not always included in the quotation by default)
• How they assess existing medical conditions, occupations and hobbies (i.e. the insurance providers underwriting stance)
Before purchasing Critical Illness insurance it's always worth taking the time to read through your chosen insurers policy documents to know exactly what conditions you are covered for. If in any doubt, contact the insurer directly for further support.
How do I know which insurance provider and Critical Illness policy is best for me?
Depending on your situation and budget, the most suited provider can vary. It’s important to understand the comprehensiveness of a policy is not always linked to the premium. Also, where one provider may place exclusions or increased premiums on to a policy due to an existing condition, others may not.
As such, if you're unsure what is right for you, you may want to speak to one of our friendly expert insurance advisers. They can help you secure a policy based on your needs and make recommendations for your cover.
Call the advised team today on:
01392 436 193 (Monday to Friday, 9am - 5.30pm)
Does critical illness cover diabetes?
Diabetes is a common disease, which you may have been diagnosed with from childhood or in your adult life. It can be controlled by diet and exercise, but if it goes untreated, it can lead to serious complications, such as heart attack, stroke, kidney failure, blindness and amputation.
While critical illness is designed to cover various illnesses and diseases, diabetes falls into two categories:
Type 1 diabetes - Diagnosis is usually made during childhood, and is a result of the pancreas not being able to produce enough insulin. Because of this, those who are diagnosed need to take insulin daily to control their sugar levels and monitor blood glucose levels regularly.
Type 2 diabetes - The most common type of diabetes. Diagnosis is made during adulthood as a result of high blood pressure and cholesterol. It can be controlled by diet and exercise, but if left untreated, it may lead to serious health problems.
As each person’s circumstances will differ, we cannot provide a definitive yes/no answer. It will all depend on what kind of medication you take, your age, your BMI, whether you’ve had any complications and how well managed the disease is.
Because of this, you may want to speak to an adviser if you have diabetes so that they can search the whole market and help find a policy based on your cicumstances.
Life Assurance and Critical Illness cover can be arranged either separately or combined in a policy. Typically, policies are arranged as:
Death Benefit only - This policy will only pay-out upon death.
All providers include Terminal Illness cover at no added cost. This means that the policy benefit would be available upon death or diagnosis of a terminal illness (typically where you are expected to survive less than 12 months), during the policy term. However, it is worth noting that this is not always available in the last 12-18 months of the policy. Please see the providers Key Features Document for full details.
Critical Illness only - This policy will only pay-out upon diagnosis of a specified Critical Illness, which meets your providers definition. Once a successful claim is made on a full pay-out condition, the policy will cease.
Death or earlier Critical Illness - This policy would pay out in the event of death or diagnosis of a specified Critical Illness that meets your insurer’s definition, whichever happens first. Once a successful claim is made on a full pay-out condition, the policy will end.
Call our expert advisers now:
03456 44 25 40 (Monday - Friday 9am - 5.30pm)
Can I Combine life insurance and Critical Illness cover?
Many insurers offer combined policies that include both life insurance and Critical Illness cover. This means you’re covered if you are diagnosed with a listed Critical Illness during the policy term, as well as if you pass away.
Combined cover is convenient because you only manage one policy and pay one premium. However, most combined policies pay out once, meaning that if you claim for a Critical Illness, the life insurance element usually ends too.
Are critical illness payouts tax free?
Critical illness claims are not taxable income - If you received a payout under your critical illness plan, the money isn’t considered taxable income. This is because the money you receive is meant to replace whatever income you lost due to a covered event. In other words, the money you receive is compensation for something else.
While many people believe that critical illness claims are similar to life insurance policies, they aren’t quite the same thing. A life insurance policy is designed to provide a lump sum payment upon death. However, critical illness claims are intended to help individuals recover financially from a covered event, such as a heart attack or stroke.
How long do you have to claim critical illness?
When it comes to Critical Illness insurance, there are no qualifying periods or 'waiting periods' - you can make a claim as soon as your insurance has been underwritten and you have been informed that your policy is active.
If you believe you have an eligible claim, you can typically get in touch with your insurer at any time, even if you have recovered already.
What happens if you can't pay your premiums?
If you are unable to pay your premiums, there are usually a few options available.
For example, if you are struggling to pay your premiums because you’re currently off work ill, and your plan includes waiver of premium, your insurer will cover your premiums for you and you won’t lose the cover.
Alternatively, they may be able to grant you some sort of payment holiday or repayment plan.
It’s important to speak to your insurer before making any decisions about your policy. They will be able to provide more information and advice on what options are available.
