What is Critical Illness Insurance and When Does it Pay Out?

Critical Illness Insurance pays out a lump sum to the policyholder should they suffer any of the illnesses listed in their policy, as long as the illness occurs during the term of the policy.

The average Critical Illness Insurance policy covers around 40 critical illnesses, but the number of conditions covered varies between providers from 10 to more than 100.

When does it payout?

The vast majority of claims are for cancers, heart attacks and strokes, although other commonly-covered serious illnesses include:

Multiple sclerosis
Parkinson’s disease
Kidney failure
Motor neurone disease
Permanent loss of vision / hearing.

Overall Protection Payout Rates Across All Insurers

Each year the Association of British Insurers (ABI) publishes average pay out rate statistics from across all insurers. The latest figures are from 2021 and show that 91.3% of all critical illness cover claims were paid, with over £1.22 billion getting paid out in total. The average payout on a critical illness policy in 2021 was more than £67,000.

The claims statistics for critical illness cover laid out below cover the insurers we most commonly work with and the percentage of claims they’ve paid out over the last 3 years.

Life and Critical Illness Insurance are often packaged together, but the below claims statistics cover standalone Critical Illness Insurance only.

Percentage of Critical Illness Claims Paid Out by Insurers

Most people understandably want to choose critical illness insurance by picking the insurer that’s the most likely to pay a claim when they need it the most.

However, it’s actually fairly hard to distinguish one provider from another in this area. Payout rates across the industry are not only higher than many people assume but are also fairly uniform.

As you can see in the table below, in 2021 almost all insurers paid out on more than 90% of the claims they received.

Insurer	2020	2021	2022
AIG	95%	98%	N/A
Aviva	92.7%	92.4%	93.5%
Guardian	£1.4 million	£2.8 million	£4.9 million
Legal & General	92%	93%	93.4%
Liverpool Victoria	92%	93%	88%
Royal London	92.4%	91.7%	93.6%
Scottish Widows	94%	93%	93.3%
Zurich	87%	87%	N/A

For instance, insurers use slightly different criteria for categorising declined claims. Some insurers might treat a fraudulent claim as declined, whereas others could class this differently.

Given this, the above table isn’t a simple measure of the best companies for critical illness insurance. One insurer might have better policy wording or could be better for you.

Samantha Haffenden-Angear
Independent Protection Expert

Need Advice on Choosing the Best Critical Illness Insurance?

When you take out Critical Illness Insurance, it’s obviously hugely important for you to be able to compare insurers and be sure that the provider will pay out in the event of a genuine claim.

However, you’ve also got to consider how to find the best Critical Illness Insurance for you given your personal circumstances, such as your health and lifestyle.

Why Speak to Us?

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We all deserve a first class service when it comes to issues as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.

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For help and fee-free advice, don’t hesitate to give us a call on 02084327333 or email help@drewberry.co.uk.