Critical Illness Insurance > Rightmortgageadvice.co.uk

About Our Protection Advice Service

When navigating the complex landscape of financial security, understanding your protection options is crucial.

While we don’t provide direct advice on protection products, we collaborate with a specialized firm to offer insights tailored to your needs if you require it.

It’s important to seek advice on these matters, especially if you’re looking to safeguard your financial future against unexpected health challenges.

Taking just an hour to explore your options can significantly impact your financial resilience, and relying solely on non-advised services like price comparison websites can lead to costly oversights.

What Is Critical Illness Insurance?

Critical illness insurance is designed to provide a tax-free lump sum if you are diagnosed with a serious medical condition covered by the policy.

Commonly covered illnesses include cancer, heart attacks, and strokes, but policies often cover a broader range of conditions.

The payout can be used however you see fit — to pay off your mortgage, cover living expenses, fund private medical care, or support your family during recovery.

Unlike traditional life insurance, critical illness insurance focuses on survival rather than death, offering financial security when you might need it most.

How Does Critical Illness Insurance Work?

When you take out a critical illness insurance policy, you select the coverage amount and term length.

If you are diagnosed with a covered illness during the term and survive the diagnosis by a specified minimum period (often 14 days), the policy pays out a lump sum.

After a successful claim, the policy typically ends unless you have purchased a plan that allows for multiple claims.

If you remain healthy throughout the term, the policy ends with no payout, much like other types of protection insurance.

How Is Critical Illness Insurance Different From Life Insurance?

The main distinction between critical illness insurance and life insurance lies in the trigger for payout.

While life insurance pays out upon death, critical illness insurance provides financial support upon diagnosis of a serious illness.

Both types of insurance serve to protect your loved ones, but critical illness insurance offers protection while you’re alive, helping to cover treatment costs, replace lost income, or adapt your living situation if necessary.

Many people choose to combine both types of cover in a single policy for comprehensive protection.

Typical Cover Options of Critical Illness Insurance

Critical illness insurance policies offer a wide range of customizable options to suit individual needs. Some of the typical cover choices include:

• Lump Sum or Annual Benefit: You can choose to arrange your critical illness cover as a one-time lump sum payment or as an annual benefit that pays out each year you meet certain conditions.
• Guaranteed or Reviewable Premiums: Guaranteed premiums stay fixed; reviewable premiums may rise over time, often starting lower but becoming more expensive later.
• Waiver of Premium: Allows you to stop paying premiums if you become too ill or disabled to work, without losing your cover.
• Children’s Critical Illness Cover: Provides financial protection if a dependent child is diagnosed with a critical illness.
• Increasing, Level, or Decreasing Cover Amounts:
  1. Increasing cover rises with inflation.
  2. Level cover stays the same throughout.
  3. Decreasing cover reduces, ideal for protecting repayment mortgages.
• Combining Different Benefit Types and Amounts: Tailor your policy with a mix of decreasing mortgage cover and increasing lifestyle cover to fully protect your financial risks.
• Including Life Cover on a First Event Basis:
  1. Combine life cover and critical illness cover, paying out on the first event.
  2. Alternatively, keep them separate so a critical illness claim doesn’t cancel your life cover.
• Low Start Policies: Policies offering lower initial premiums, increasing over time, to make cover more affordable in the early years.

What Is Covered by Critical Illness Insurance?

Typical conditions covered include:

• Cancer (of specified severity)
• Heart attack
• Stroke
• Major organ transplant
• Multiple sclerosis
• Coronary artery bypass surgery

When Would Critical Illness Insurance Not Pay Out?

Critical illness insurance claims may be denied for several reasons:

• Non-Disclosure of Medical History: Failing to fully disclose your health background can void the policy.
• Non-Covered Conditions: Diagnosis must meet the specific definitions outlined in the policy.
• Policy Exclusions: Some conditions or scenarios, like early-stage cancers, might not trigger a payout.
• Lapsed Policies: Missing premium payments can invalidate your protection.

Do I Have to Buy Critical Illness Insurance?

There’s no legal requirement to purchase critical illness insurance. However, if you have financial responsibilities — such as a mortgage, dependents, or business commitments — it can be an invaluable safeguard.

For the self-employed and those without significant employer benefits, this cover can form a vital part of financial planning.

Is Critical Illness Insurance Worth It?

For many, critical illness insurance offers vital peace of mind.

If a serious diagnosis would create financial pressure — whether through lost income, medical costs, or home adaptations — a tax-free lump sum payout can be life-changing.

However, it's essential to balance the cost, benefits, and coverage definitions to ensure that the policy truly fits your situation.

Critical Illness Cover vs. Income Protection: Which Makes More Sense?

Interestingly, critical illness insurance can often be more expensive than income protection, even though income protection is generally more comprehensive.

Here’s why:

• Critical illness insurance only pays out if you are diagnosed with one of a specific list of serious illnesses, and only if the condition meets strict definitions.
• Income protection, by contrast, pays a monthly income if you are unable to work due to any illness or injury, not just a specified list. It covers a much broader range of scenarios, including mental health conditions, musculoskeletal issues, and other causes of long-term incapacity that may not trigger a critical illness payout.

Because of this:

• Income protection typically replaces a portion of your income (often up to 50-60%) for as long as you're unable to work — potentially up until retirement.
• Critical illness cover is a one-off lump sum designed for major life adjustments rather than ongoing income replacement.

Which Should You Choose?

If budget is limited, income protection often offers better value for money because it protects against a wider range of risks and supports your day-to-day living costs during long-term illness.

Critical illness cover can be excellent for major financial milestones — such as paying off a mortgage after a serious diagnosis — but for many people, income protection is a more practical foundation for financial resilience.

Ideally, many people benefit from having both types of protection: income protection for everyday financial stability, and critical illness cover for large, one-off costs.

This decision should always be made with professional advice, based on your individual needs, responsibilities, and financial goals.

Why It’s Vital to Seek Professional Advice

Designing a critical illness insurance policy isn’t just about selecting a cheap quote — it’s about ensuring the policy works exactly when you need it most.

Given the wide range of flexible cover options and subtle differences between insurers, it's easy to either overpay for unnecessary extras or, worse, leave significant gaps in protection.

A protection adviser can help you:

• Customize your policy precisely to your mortgage, lifestyle, and family responsibilities.
• Understand complex terms like “definitions of critical illnesses” to avoid future claim disputes.
• Navigate combinations like lump sum vs. annual benefit or first event vs. separate life and illness cover.
• Plan for the future — ensuring your policy remains suitable even if your circumstances change.

Professional advice doesn't just help you choose a policy — it helps you build a protection strategy that supports your long-term financial security.

RIGHTMORTGAGEADVICE.CO.UK DOES NOT PROVIDE ADVICE ON OR ARRANGE PROTECTION PRODUCTS. WE WORK WITH ANOTHER FIRM SPECIALISING IN THIS FIELD WHO CAN PROVIDE ADVICE ON & ARRANGE THESE PRODUCTS FOR YOU; IF YOU WISH. THERE IS NO OBLIGATION TO PROCEED WITH SUCH PRODUCTS.