How does critical illness insurance work?

Just like death, illness can happen when it's least expected. In this time, your finances could be seriously impacted if you are unable to work, putting your family's financial security in jeopardy. Critical illness insurance can help to reduce the financial burden you may face, should the worst happen.

What is critical illness insurance?

Critical illness insurance is a form of life insurance policy which provides financial protection and support  should you be diagnosed with a serious illness which meets your insurer's definition and severity, during the policy term. In the event of a valid claim, the policy would pay out a tax free lump sum. Critical illness provides peace of mind for those concerned about both their personal and family’s financial situation should the worst happen.

Unlike life insurance, a stand alone critical illness policy does not protect you in the event of death. Despite this, they work in similar ways, i.e. they provide financial support and protection when a claim is made. Like any type of insurance policy, you pay monthly premiums for cover, which need to be maintained in order for your policy to remain in force.

Note that you need to continue making monthly payments in order to remain covered. Failure to make these payments can result in your cover being ended early.

What's covered?

It's important to understand that not all conditions may be covered by your policy. For example, COVID-19 is not considered a critical illness, meaning any claim you make would be denied.

When applying for cover, your insurer should have a specific list of what is and isn't covered in your policy. In order to claim on a critical illness policy you must meet the criteria (typically a specified definition and severity) outlined in your cover agreement.

Depending on the insurer, critical illness may also cover you from a serious injury or disability. For more information on what is covered under your policy agreement, see the policy documents issued by your insurer. 

It’s really important to remember that, when it comes to critical illness policies, the conditions covered and definitions of illnesses can vary from insurer to insurer, so always check your policy schedule and contact your chosen insurer directly if you are unsure what you may be covered for.

Making a claim

In the event you are diagnosed with a critical illness, you should contact your insurer as soon as possible. This can usually be done online or over the phone. Next, your insurer will review your claim in which they may contact your doctor or GP for further medical evidence.

A successful claim will result in a one-time lump sum being paid out to you by your insurer. The length of the overall claims process will vary from insurer to insurer.

Can I get critical illness cover without life insurance?

You can purchase critical illness insurance either as a standalone policy or as anadd-on to a life insurance policy. Typically, critical illness can be taken out alongside a whole life or term life insurance policy. So what's the difference between the pair?

• Whole life insurance(also known as life assurance) covers you for the remainder of your life. Though it's usually the most expensive type of life insurance, it gives you and your loved ones peace of mind for the future. This means your critical illness policy would pay-out regardless of when you are diagnosed.
   

• Term life insurancecovers you for a set period of time (i.e 25 years). The policy only pays out if you die within this timeframe, after that the policy expires. This also applies to your critical illness cover. This type of policy has three levels of cover - level term, increasing term & decreasing term. Term life policies are typically a cheaper option for life cover.

These insurance types both pay lump sum payments to your family when you die. Just like critical illness cover, they provide financial protection for your loved ones, covering any finances. You can also get a joint policy - which covers both you and your partner from illness or death.

How much is critical illness insurance?

Before you apply for critical illness cover you should assess how much cover you need. This mainly depends on financial aspects, such as your monthly outgoings, salary, and extra costs that impact your bank balance.

How to buy critical illness insurance

At Cavendish Online, there are three ways you can purchase a critical illness policy:

• Apply Online - This option is best suited for those with no pre-existing medical conditions, where the amount of critical illness cover is equivalent to the amount of life cover. It's also ideal for people who are looking to purchase critical illness cover alongside a life insurance policy (i.e. a life or earlier critical illness policy). 
  
  Note that when you apply online the panel of insurers available is restricted - so if you have a certain insurer you would like to secure a policy with, you may wish to speak to an adviser (as they operate on a ‘Whole of Market’ basis). Apply online for a quote.
   

• Apply over the phone with guidance - This option is ideal if you have a generally good idea of the policy you want to purchase, but require a second opinion. Our guidance team can provide quick quotes, helping you through the application process. 
  
  Note that when you apply with guidance the panel of insurers available is restricted - so if you have a certain insurer you would like to secure a policy with, you may wish to speak to an adviser (as they operate on a ‘Whole of Market’ basis).
   

• Apply over the phone with advice - Best suited for those who have medical conditions to disclose, those who are employed in a high-risk job, have dangerous hobbies, or simply want to speak to an expert who can recommend the best cover for their needs! 
  
  Our advisory team will take the time to understand your situation, researching the market and providing recommendations tailored to your needs. They operate on a ‘Whole of Market’ basis, meaning your search will not be limited to certain insurers.

What happens if I can't pay my 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.