What is critical illness insurance?

I have been provided life insurance quotes from my mortgage adviser and they include critical illness cover, what does this mean?

Question asked by Sarah Jackson
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Answered by Andrew Jenkinson

It is very common for mortgage advisers to provide life insurance options with critical illness cover and it is important not to confuse terminal illness with critical illness insurance when considering your options.

Most standard UK life insurance policies cover terminal illness paying out an accelerated benefit should the policyholder be diagnosed with a terminal illness during the policy term.

Critical illness insurance on the other hand is an additional option which is often bought as a combined product with life insurance. Critical illness cover (CIC) pays out a lump sum should you suffer one of the 30 to 50 serious illnesses as defined in the insurer’s policy wording. The most common illnesses which are covered include cancer, heart attack and stroke.

For more information on the product please see our ‘Guide to Critical Illness Cover’.

Is income protection more appropriate?

It is often easier for a mortgage broker or adviser to provide you with Life and Critical Illness Insurance options without making you aware of Income Protection although it may well be a more appropriate policy.

Where CIC will only pay out if you suffer one of the serious illnesses as defined in the insurers policy terms and pay out a single lump sum, income protection (IP) will pay out a monthly income should you suffer any illness or injury which prevents you from doing your own job. IP will continue to pay you a monthly benefit either until you are well enough to return to work or reach the end of the policy term (which is often aligned with your expected retirement age).

IP is more often than not the more appropriate policy as it pays an monthly income which aligns with your financial commitments rather than a single lump sum. In addition it is far more comprehensive than critical illness cover as it will pay a claim for many illnesses or injuries which would stop you earning a living where critical illness cover would not pay out.

For more information on whether income protection or critical illness cover is more appropriate please see our guide – Income Protection vs Critical Illness Cover.

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This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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