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Is Critical Illness Cover worth it?

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Why Critical Illness Insurance?

Critical Illness Cover provides a tax-free lump sum payment if you’re diagnosed with a serious medical condition specifically listed in the terms and conditions of the policy. The most common claims are for:

  • Cancers
  • Heart Attacks
  • Strokes

The payout can be used however you choose and can prove invaluable in what is likely to be a time of need after the diagnosis of a serious medical condition.

Some people use payouts to support themselves and their families with everyday living costs. Other common things people use the payout for include:

  • Clearing a mortgage
  • Paying for medical treatment
  • Paying for home modifications or other equipment associated with your medical condition
  • Funding a dream holiday, or other items on a bucket list.
Victoria Slade Independent Protection Expert at Drewberry

How would you cope if you were struck with a serious illness such as cancer, a heart attack or a stroke? Would your finances hold up under this strain?

It is important to think about the peace of mind that can be gained from knowing you have suitable financial protection in place.

Victoria Slade
Independent Protection Expert at Drewberry

Do I really need Critical Illness Cover?

When considering whether Critical Illness is worth it you need to take into account your personal circumstances and any support you may be entitled to. You may have alternate means of support available to you if you cannot work due to a serious illness, such as state benefits or company sick pay, that you could fall back on.

Government Support

Think about the government help that may be available to you if you suddenly found yourself out of work.

This might include benefits such as Employment and Support Allowance and the Personal Independence Payment.

If you’re aged 16 to 64 you could get between £22.65 and £145.35 a week by claiming the Personal Independence Payment, although the amount you get depends on how your condition impacts your daily life.

Employment and Support Allowance, meanwhile, starts at £73.10 per week for the over-25s.

Savings

You may not think Critical Illness Insurance is worth it if you have savings to fall back on however it is important to put your savings into perspective in terms of how long they could last.

Not many people have several years of income stashed away to use if they couldn’t work long-term. Unless you have a particularly sizeable nest egg, Critical illness Insurance could still provide the financial lifeline to keep you a float during such difficult times.

Company Sick Pay

Your employer might offer sick pay for a length of time, but most of us aren’t lucky enough to get the kind of long-term sick pay that would see you through a serious illness where you’re off work for months or even years.

Group Critical Illness
You may be lucky enough that your employer provides benefits such as Group Critical Illness Cover. A group scheme would typically cover 2 – 4 times your basic salary however the number of illnesses covered tends to be more limited than with a personal policy.

Also remember that if you leave or lose your job, these benefits will be lost. At this point, arranging private cover will likely to be more expensive than when you were younger. Also, if you’ve suffered a serious medical condition it may not be possible to get cover at all.

Will I Need to Make a Claim?

The truth is that people of working age are many times more likely to suffer a critical illness than to die. When considering if Critical Illness Cover is worth it, you should look at the likelihood of you needing to make a claim.

Statistics from the Drewberry Protection Survey 2018 found that, when looking back across their entire working lives, 14.7% of the over-55s had needed to take 6 consecutive months off work at some point.

Meanwhile, Office for National Statistics data reveal that almost 2 million people in the UK were economically inactive due to long-term sickness in the 3 months to September 2018.

While not everyone will be off work with a condition that would trigger a Critical Illness Insurance claim, the fact remains that the likelihood of being off work sick is far higher than people think.

Cancer, Heart Attacks and Strokes

In assessing the likelihood that you’ll need to make a claim, consider the claims statistics from leading insurer AIG for the year 2017. These showed 60% of all critical illness claims were due to cancer. A further 10% of claims were made up of strokes and 8% were due to heart attacks.

Cancer

According to Cancer Research UK, half of people born after 1960 will develop cancer at some point in their lives and there are around 360,000 new cases of cancer diagnosed each year.

On average, almost 50% of cancer cases are diagnosed in people old enough to work and below the age of 70.

Heart Attacks and Strokes

The British Heart Foundation estimates that:

  • 1 million people have survived a heart attack in the UK, with one heart attack occurring every 3 minutes
  • About 1.3 million have survived a stroke, with a stroke occurring once every 5 minutes.

Will Critical Illness Cover Pay Out?

Payout rates on Critical Illness Insurance have increased notably over the past decade, with much of this being down to the Association of British Insurers (ABI) release of its code of practice on non-disclosure in 2008.

This clarified the medical information that clients needed to share with insurers and saw payout rates on Critical Illness Insurance rise from around 80% to in excess of 90% by 2017.

ABI and ABI+ Definitions

The ABI provides model definitions of conditions covered by Critical Illness Insurance policies. These outline the minimum standards the industry should be aiming for when they claim to cover a condition.

Many providers have gone over and above these standard ABI definitions of illnesses and offer what are know as ‘ABI+’ definitions, making the policy more comprehensive and more robust than the minimum standard.

Enhancing the proposition by offering a number of ABI+ definitions increases the chances of a successful claim being made on the policy.

A good way to compare Critical Illness Insurance is to look at not just the number of critical illnesses covered but also how many conditions meet the ABI’s minimum standards, and how many are enhanced above this level.

Sam Barr-Worsfold Independent Protection Expert at Drewberry

At Drewberry we have access to a sophisticated piece of modelling software that examines the terms of the most popular Critical Illness Insurance policies and works out the likelihood of each individual policy paying out for a condition someone like you is most likely to suffer.

Sam Barr-Worsfold
Independent Protection Expert at Drewberry

Is Critical Illness Insurance Expensive?

The four major factors affecting how much Critical Illness Insurance costs are:

  • Sum assured
    How much the policy will pay out in the event of you being diagnosed with a critical illness. The larger the sum assured, the more the policy will cost.
  • Length of the policy
    The longer you choose to cover yourself for and the higher your age at the end of the policy, the more a policy will end up costing.
  • Type of premiums
    Whether your premiums are guaranteed (fixed at the outset) or reviewable (cheaper at the start but increasing over the life of the policy) will impact the cost of premiums
  • Type of cover
    With Critical Illness Cover, you can have level cover, which remains fixed throughout the length of the policy, or decreasing cover, which falls across the policy term, typically in line with a repayment mortgage. Level cover is more expensive as the liability to the insurer stays fixed over time.

The level of cover you require tends to have the biggest weight in terms of the cost of cover. If you’re looking to cover your income in addition to an outstanding mortgage then you may want to consider Income Protection which can be a more cost effective alternative.

Consider Income Protection…

Income Protection is designed to replace a proportion of your earnings if you can’t work due to any illness or injury.

Income Protection can be seen as more comprehensive than Critical Illness Insurance because it’s designed to pay out for anything that medically prevents you from working, rather than only paying out based on a critical illness defined by the policy.

Premiums for Income Protection can be a lot more palatable than for Critical Illness Insurance as you are insuring yourself for a smaller monthly benefit rather than a single large payout.

Read our Critical Illness vs Income Protection guide for more on the differences between these two types of protection.

Additional Cover With Critical Illness Insurance

When comparing policies and deciding if Critical Illness Cover is worth it, one factor you may wish to look at is the extra benefits that come with some policies.

While this shouldn’t override considerations such as how robust the policy is in terms of the definitions of illnesses or whether premiums are affordable, it may help tip the balance between providers.

In some cases, these additional benefits are great extras that really add value:

  • Global medical treatment
    Funding for you to go abroad to treat your condition if there’s a foreign specialist who can be of more use than UK doctors
  • A second medical opinion
    Access to some of the leading doctors in their field for a second medical opinion if you’re diagnosed with a critical illness
  • Critical illness cover for children
    Usually representing a payout of the lower of 25% of the sum assured or £25,000 if your child is diagnosed with one of the illnesses specified by the policy
  • Medical helpline
    This can provide you with access to medical professionals for help and advice if you fall ill
  • Bereavement counselling
    Often included with joint Life and Critical Illness Insurance policies, this provides bereavement counselling for your family if you were to die during the policy’s term.

Need Critical Illness Cover Advice?

There is a lot to consider when it comes to setting up the correct financial protection and it can all get a little bit overwhelming.

Whether it be as fundamental as deciding between Critical Illness or Income Protection or coming to a decision on the level of cover you need and how long you want to be protected for.

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

  • There is no fee for our service
  • We are independent and impartial
    Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
  • We’ve got bargaining power on our side
    This allows us to negotiate better premiums for you than you going direct yourself.
  • You’ll speak to a dedicated expert from start to finish
    You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
  • Benefit from our 5-star service
    We pride ourselves on providing a 5-star service, as can be seen from our 2024 and growing independent client reviews rating us at 4.92 / 5.
  • Gain the protection of regulated advice
    You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
  • Claims support when you need it the most
    You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.
Samantha Haffenden-Angear

If it is all getting a little confusing and you want to talk through your options to make sure you find the most suitable cover please don’t hesitate to get in touch.

Pop us a call on 02084327333 or email help@drewberry.co.uk.

Samantha Haffenden-Angear
Independent Protection Expert at Drewberry

Oliver did a great job setting me up with Income Protection. I would highly recommend using his service and will use again.

Jason Cooper
01/12/2018
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