What are the different types of critical illness insurance?
Understanding the different types of critical illness insurance will help you to determine what you need. Critical illness insurance comes in several different forms as outlined in the table below:
| Critical illness insurance types |
How it works |
| Combined with a Life insurance policy* |
The policy pays out a one off lump sum if you die OR if you get a critical illness. Once the policy has been paid out it stops, so if you receive a payout for critical illness, your life insurance cover stops. This is also known as Level Term cover. |
| Part of Mortgage Protection insurance policy* |
The life insurance and critical illness cover amounts (sums assured) match the outstanding amount on your mortgage (or other loan). The outstanding amount of your loan is repaid if you die OR become critically ill. For repayment mortgages your sum assured automatically decreases as you repay the loan. This is also known as Decreasing Term cover. The policy pays out once, for death OR critical illness, but not both.
N.B. An interest only loan which doesn't reduce over time would require Level Term cover. |
| Part of Income or Family Protection insurance policy* |
Provides regular installments (for a nominated length of time) to replace income lost due to a critical illness. Normal income or payment protection insurance only covers you if you are unable to work for a short time due to a non-critical sickness or accident. |
| Stand alone Critical Illness insurance policy |
If you already have life insurance and other types of income protection insurance in place, you can take out a separate stand alone critical illness insurance policy which pays out when you become critically ill without affecting any of your other insurance policies. Types of cover include Level Term for a fixed period of between 5 and 40 years and Flexible Cover renewed every 5 to 10 years. |
There are also more critical illness options which may already be included, or added at an additional cost.
*Critical illness insurance included as part of another insurance policy it is usually referred to as Accelerated Critical Illness Cover, this is the most common type of critical illness cover in the UK.
The table below explains the most common options available:
| Optional extra |
Description |
| Automatic cover for children |
Usually included free in most critical illness insurance this provides the same level of cover for your dependent children. |
| Waiver of premium |
Also known as Premium Protection, having this option means the Insurer will continue to pay your critical illness insurance premiums (to keep your policy valid) if you are unable to due to temporary sickness, accident or redundancy. |
| Terminal Illness |
Pays out the sum assured if your doctor expects you to die within 12 months of your initial diagnosis.
N.B. If you don't have this option (or life insurance) on your critical illness policy and you die within 30 days of being diagnosed, your critical illness policy will not pay out. |
| Index Linking |
Also known as Indexation, your critical illness sum assured is linked to the retail price index and is increased by the equivalent percentage inflation rate each year. You wouldn't need this option if your cover is tied to a mortgage or loan which isn't affected by inflation. |
| Guaranteed Insurability |
If you want to increase your cover due to a change in circumstances i.e. you have children or get married, this option allows you to take out more cover without having to be medically assessed again. |
| Joint policy options |
Separation cover: If a couple separate their joint policy can be automatically split into two separate policies without either having to re-apply.
Replacement/Reinstatement cover: When one policy holder makes a claim the policy automatically stops. This option allows the remaining policy holder to replace or reinstate the policy without having to re-apply. |
| Trusts |
Some insurers offer the option to set up a family trust for you which avoids your family having to pay inheritance tax amongst other things. |
| Life cover buy back |
For policies that include life insurance. If you make a critical illness claim the policy stops and the life cover stops. Having a critical illness makes it difficult to get life insurance so this option enables you to buy a restricted life insurance policy back from the insurer without having to re-apply. |
| Major Surgery cover |
For specified conditions an early payment of whole or part of your critical illness cover can be made to a private hospital to help pay towards the cost of certain types of surgery. |
| Total and Permanent Disability |
Insurers' definitions vary, but this generally covers you in the event you become totally and permanently disabled as a result of an illness or accident and are unable to work again. |
In addition to the above, other options such as Total Mastectomy cover, Fracture cover, Free cover during underwriting and Accident Hospitalisation cover may also be available. Always check which options an insurer offers.
Another common feature of critical illness cover is the option to join a wellness rewards scheme offered by the insurer. You join a rewards programme and receive discounts or vouchers for health and wellness activities, encouraging you to look after your health and maintain a healthier lifestyle. In some cases being actively part of this type of scheme can result in the insurer offering you lower premiums!
Download the Critical Illness Cover Insurance PDF Guide here - see our other free PDF guides here
Guide Contents
What is critical illness insurance?
Why you might need critical illness insurance
What are the different types of critical illness insurance?
Critical illness premium options
Shopping around for your critical illness insurance
Applying for your critical illness insurance
Critical illness insurance FAQs
Where can I go to get more help?
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