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9 Dec 2023
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Critical Illness Insurance Explained

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Critical Illness Insurance

Critical illness insurance pays out either a lump sum or regular monthly income if you are diagnosed with a qualifying illness during the term of the policy.

This type of cover can be taken as part of a term life insurance, decreasing life insurance, standalone cover or as part of a family income benefit policy.

The types and range of illnesses covered by a critical illness policy vary from company to company. It Is advisable to read the insurance companies key facts document before you apply for your policy.

You can choose both the term of the policy and the level of cover, although some restrictions may apply.

Critical Illness Insurance Pros & Cons


  • It will be useful if you would like to protect yourself or your families financially if you are diagnosed with a critical illness.
  • It is up to you how you spend the money.
  • You can have the pay out as a lump sum or a monthly income tax free.
  • If you select additional critical illness insurance your life insurance will continue after a claim


  • Not all critical illnesses will be covered under the policy. It can be complicated to compare the key facts document of the critical illness providers Online.
  • You are sometimes not covered for pre-existing conditions.
  • Critical illness policies can be expensive.

What is Critical Illness Insurance?

If you suffer a qualifying critical illness your policy will pay out either a lump sum or a regular monthly income. When you make a claim you are allowed to keep the policy pay-out even if you make a full recovery.

They policy can be built into another life insurance policy on a level term life insurance, increasing term, decreasing term insurance (mortgage life insurance) family income benefit (pays a monthly amount) or as a stand alone critical illness policy. Once you have made a claim it is normal that you policy will cease and other benefits will therefore cease.

Different types of cover available:

Level Cover

  • lump sum is payable in the event of serious illness. This lump sum remains level throughout the period of the policy term.

Decreasing Cover

  • This lump sum decreases by a fixed amount during the period of the term, decreasing to nil by the end of the insured period. This form of cover is usually used for mortgages or other loans where the amount owed decreases year on year.

Increasing Cover

  • the sum assured is reviewed each year and the provider will write to you to inform you of the revised sum assured, typically increasing in-line with inflation. The premium will also rise if you accept the increase in your cover.

Family Income Benefit

  • This type of cover, gives your loved ones a regular monthly income not a lump sum. (this income is not taxable as earned income) But the income is only paid for the term of the policy, so the nearer the end of the policy you die, the fewer years it pays out for.

Additional options and areas for consideration include:

  • Stand alone Critical Illness: with stand alone plan in some cases the premiums can be higher than that of a comparable life and critical illness policy quotation.
  • Waiver of Premium: if illness prevents you from working your monthly premiums are paid on your behalf for after a set deferment period. Check the quotes Key Facts documents for each quotation produced.
  • Survival Period: most policies require you to survive for a specified period following a critical illness diagnosis, typically 14 days to 3 months. Check the quotes Key Facts documents for each quotation produced.
  • Permanent Total Disability: if this is not included you will be unable to claim if an illness or accident leaves you unable to work. Also, check the definition of 'permanent total disability'. Some policies define it as being unable to perform any job whilst others define it as being unable to continue in your previous occupation. Check the quotes Key Facts documents for each quotation produced.
  • Children's critical illness insurance: some policies will pay out a fixed lump sum should one of your  children be diagnosed with a critical illness. The terms and conditions of policies vary and some charge an additional premium. Check the quotes Key Facts documents for each quotation produced.

Critical Illness Insurance Policies can be Split into Three Types :

Death or Earlier Critical Illness 

  • pays on either death or qualifying serious illness but not both.

Death & Critical Illness

  • pays on qualifying serious illness and death. Once a claim has been made against a critical illness, further claims cannot be made.

Standalone Cover

  • pays out once on diagnosis of a qualifying serious illness during the policy term.

Policies vary but nearly always include the following illnesses;

Heart attack, certain forms of cancer, a stroke, and kidney failure, coronary bypass or transplant. For full details on the cover provided it is advisable to compare the Key Facts document for each providers quotes produced.

With critical illness cover providers the additional types and range of illnesses covered vary between the providers with Vitality covering 129 illnesses compared to Aegon's 68. (Source Webline 23/06/2023). Some critical illness providers will also make partial payments for less server case's of an illness, which can be beneficial if you want to stand a higher chance of being able to claim on your policy.

As the differences between providers policies can be so greatly we recommend you read the plans key facts document or speak to one of our advisors before you apply for your critical illness insurance policy.

We have produced a typical list of the illnesses covered by a critical illness policy to give you a guide as to whether this type of plan is right for you. Some people find that an income protection policy can provide the cover they are looking for at a lower premium.

Critical Illness Insurance Guide

What is Critical Illness Mortgage Life Cover?

This would typically be part of a decreasing mortgage life insurance plan and usually will offer a lower monthly payment then a level plan. By having a mortgage life & critical illness insurance you could have peace of mind that you mortgage is cleared on diagnosis of a qualifying critical illness.

Do you want Advice on Protection insurance?

After looking through the critical illness cover information if you would like critical illness insurance advice, complete our inquiry form and we will contact you to discuses your protection needs.

Alternatively our Online critical illness insurance quote tool allows you to compare the leading insurance companies critical illness premiums and illnesses covered. What's more Go Direct guarantee that at the time of application you will not get cheaper like for like cover as we rebate 50% of the initial commission the provider pays us back into your critical illness insurance policy.

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Go Financial Services is a trading style of Go Direct UK Ltd which is an appointed representative of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales Company 5703224. FCA Number 456600

Online Critical Illness Quotes from Go Direct - Critical Illness Insurance