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?
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:
(Monday to Friday, 9am - 5.30pm)
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.
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 the right policy for your needs and make recommendations for your cover.
Call the advised team today on:
(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, it’s best to speak to an adviser if you have diabetes so that they can search the whole market and find out what’s best for you.
How does critical illness cover differ from life insurance?
Critical illness insurance pays a lump sum out if a serious illness, disease or injury is covered under your policy. Some common examples of why a policy might pay out would be if you had a heart attack, a stroke or were diagnosed with cancer as met by your insurer's definitions (please check your policy documents to be certain).
The minimum standards for a critical illness plan are outlined by the Association of British Insurers (ABI).
Most critical illness cover plans include life insurance as well, meaning the policy could pay out upon death.
Each provider will state in their terms and conditions or policy documents exactly what is covered in the plan, so check there to make sure you have the cover you want in place.
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.
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.