Is Critical Illness Cover Worth It in the UK? Pros, Cons and When to Get It
- Jamie Reid - Credit, Loans & Everyday Money Writer
- Apr 1
- 6 min read
Critical illness cover can be a financial lifeline if you're diagnosed with a serious illness — but is it actually worth the extra cost? Many UK life insurance providers offer it as an optional add-on, but it’s often misunderstood. It doesn’t cover every illness, it’s not always cheap, and it may overlap with existing protection you already have.
This guide explores what critical illness cover is, what it pays out for, who should consider it, the key pros and cons, and how to decide whether it’s the right addition to your life insurance policy. We’ll also highlight a few common traps to avoid — and a unique insight many people miss when comparing policies.
What Is Critical Illness Cover?
Critical illness cover is an insurance policy that pays out a tax-free lump sum if you’re diagnosed with a specified serious medical condition during the term of the policy. It’s designed to help cover the financial impact of being unable to work, pay the bills, or support your family while recovering or undergoing treatment.
It’s commonly bought alongside life insurance but can also be arranged as a standalone policy.
What Conditions Are Covered?
Each insurer has its own list of covered conditions, but most UK critical illness policies include:
Cancer (of a certain severity)
Heart attack
Stroke
Major organ transplant
Multiple sclerosis
Coronary artery bypass surgery
Kidney failure
Motor neurone disease
Paralysis
Many modern policies cover 40 to 60 conditions, with partial payouts offered for early-stage or less severe diagnoses.
What’s Not Covered?
Critical illness cover does not pay out for:
Minor conditions or early-stage illnesses that don’t meet the insurer’s definition
Chronic but manageable illnesses (such as controlled diabetes or asthma)
Mental health conditions (usually excluded or covered under separate plans)
Temporary or short-term illness
Pre-existing medical conditions you didn’t disclose
Always read the policy’s key facts document to understand the specific criteria for claims.
How Does It Compare to Life Insurance?
While life insurance pays out if you die, critical illness cover pays out if you’re diagnosed with a serious illness and survive. Here’s how they differ:
Trigger for payout:
Life insurance pays on death
Critical illness pays on diagnosis of a specified condition
Use of funds:
Life insurance is often used for funeral costs, mortgage repayment, or inheritance
Critical illness cover helps fund treatment, living costs, mortgage, or adjustments to your lifestyle
Policy duration and structure:
Both can be arranged as term policies (lasting for a fixed number of years)
Critical illness cover can be added to life insurance or bought separately
Read our guide on: What Does Life Insurance Cover?
Read our guide on: Types of Life Insurance in the UK
Pros of Critical Illness Cover
Financial support during serious illness:Helps you maintain your lifestyle and meet expenses while you recover, without needing to rely on savings or benefits.
Tax-free lump sum payout:Gives you complete flexibility — you can use it to clear debt, adapt your home, pay for treatment, or take time off work.
Can be combined with life insurance:Bundling life and critical illness cover into one policy is often cheaper than buying separately.
Children’s cover may be included:Many policies include limited cover for your children at no extra cost, giving added peace of mind for families.
Cons of Critical Illness Cover
Not all illnesses are included:Each insurer has its own definitions — you must meet their criteria exactly for a valid claim.
Can be expensive:Premiums are often higher than standard life insurance, especially as you get older or have existing health conditions.
No payout if you die without making a claim:Critical illness cover only pays out while you’re alive — unless it’s bundled with life insurance, it won’t provide for your family if you pass away.
Exclusions and limitations:Claims for undisclosed or pre-existing conditions can be declined, and mental health issues are rarely covered.
Unique Insight: A Replacement for Lost Income
Many people buy critical illness cover to clear their mortgage, but it can also act as income replacement — especially for the self-employed or those without generous sick pay.
If you’re diagnosed with a critical condition, a lump sum can cover months or years of lost earnings, making it a useful tool even for those without major debts. This is especially true when combined with income protection insurance, which pays a monthly income.
[Link: Income Protection Insurance – What You Need to Know]
Who Should Consider Critical Illness Cover?
You may benefit from critical illness cover if you:
Have dependants relying on your income
Own a home with a mortgage
Are self-employed or lack sufficient sick pay
Want to avoid dipping into savings in the event of illness
Have a family history of serious medical conditions
Want peace of mind that a health crisis won’t become a financial one
When Critical Illness Cover Might Not Be Worth It
It may not be necessary if:
You already have substantial savings
Your employer provides long-term sick pay or group critical illness cover
You’re over 60, debt-free, and have no dependants
You prefer to prioritise life cover due to budget constraints
How Much Does Critical Illness Cover Cost?
Premiums depend on a number of factors, including:
Your age
Whether you smoke
Medical history
The size of the payout
Whether it’s level or decreasing cover
If you bundle it with life insurance
As a rough guide, a healthy non-smoker in their 30s might pay £20–£30 per month for £100,000 of cover. The cost rises significantly with age or if pre-existing conditions are involved.
Use a broker or comparison site regulated by the Financial Conduct Authority (FCA) to compare quotes. Always verify insurers via the FCA Register.
Real-World Example: When It Helped
Case study:
Paul, aged 42, was diagnosed with a severe stroke. As a self-employed builder, he had no access to sick pay and couldn’t return to work for over a year. His critical illness policy paid out £150,000, which allowed him to:
Keep up with mortgage payments
Pay for rehabilitation services
Support his family during recovery
Avoid going into debt or applying for benefits
Without the policy, the financial consequences would have been devastating alongside the health challenges.
How to Choose the Right Policy
To find the right critical illness cover:
Review the list of covered conditions — and understand how they’re defined
Consider a bundled policy — combining with life insurance can save money
Check for children’s cover — if relevant to your family
Evaluate the payout amount — would it be enough to replace lost income or pay off your mortgage?
Look for additional benefits — such as partial payouts or cover for less severe illnesses
Understand what happens after a claim — does the policy end or continue with reduced cover?
Inflation-proof your cover — some policies let you increase cover annually to keep up with the cost of living
FAQs: Critical Illness Cover UK
Q: Is cancer always covered?
Most policies cover cancer, but only certain types and stages. Early-stage or non-invasive cancers may not meet the insurer’s claim criteria.
Q: Can I buy critical illness cover without life insurance?
Yes, it’s available as a standalone policy, though it’s often more cost-effective when bundled with life cover.
Q: Does it pay monthly like income protection?
No — critical illness cover pays a lump sum, not a monthly income. For ongoing payments, look into income protection insurance.
Q: Is the payout tax-free?
Yes, critical illness payouts are generally tax-free in the UK.
Q: Can I get cover if I have a pre-existing condition?
In some cases, yes — but that condition may be excluded, and your premiums may be higher.
Q: Does the policy end after one claim?
Usually, yes. Once the lump sum is paid, the policy ends. Some policies offer additional cover for multiple events — check the terms.
Final Thoughts: Is Critical Illness Cover Worth It?
Critical illness cover isn’t for everyone, but in the right circumstances, it can make a huge difference. If you were unable to work for months or years due to a serious illness, would your finances survive — or would your family struggle?
If you have dependants, debts, or a limited financial cushion, critical illness insurance could be a smart investment in your future resilience.
Before buying, consider:
Your health risks and family history
The financial impact of not working
Whether your budget allows for it alongside life insurance
How it complements any existing sick pay or income protection cover
Making an informed decision now can protect you from unexpected hardship later.
Disclaimer: Smart With Money may receive compensation through affiliate links, sponsored content, or advertising featured on this site. This does not influence our editorial standards. All reviews and recommendations are based on independent research, and we aim to provide accurate, objective information to help you make informed financial decisions.
Please note: All content on SmartWithMoney.co.uk is for informational purposes only and does not constitute financial advice. Always seek guidance from a qualified financial adviser before making any financial decisions.
