Critical Illness Cover
About critical illness cover
Critical illness cover pays a tax-free lump sum if you're diagnosed with one of the serious conditions listed in your policy, such as cancer, a heart attack or a stroke. You pick the amount and the term, and the insurer sets a monthly premium based on your age, health and the conditions covered. It pays out on diagnosis, whether or not you carry on working. The money is yours to use however you need.
What you're covered for with critical illness cover comes down to the policy's definitions. Two policies can both name 50 conditions and pay out very differently, because one defines a heart attack, or an early-stage cancer, more tightly than the other. The cheaper policy is sometimes the one that pays less when you claim.
At Vintage Wealth Management, we treat critical illness cover as one part of your protection plan. It works closely with your life insurance and income protection, and often with the mortgage it's meant to cover. We look at what you already hold, including any cover through work, then recommend across the whole market and read the definitions so you're not caught out at claim time.
What is critical illness cover and how does it work?
Critical illness cover is an insurance policy. It pays you a tax-free lump sum of money if a doctor diagnoses you with one of the serious illnesses named in the policy.
You decide how much cover you want and how many years it should last. In return, you pay the insurer a fixed amount each month. If you're diagnosed with one of the listed illnesses while the policy is running, you make a claim and the insurer pays you the lump sum. The policy pays out once, and then it stops.
For a claim to be paid, three things all need to be true:
The illness you're diagnosed with is named in your policy.
Your diagnosis fits the exact definition the policy uses for that illness.
You live for a set number of days after diagnosis, usually between 10 and 28 days, depending on the insurer.
If even one of these isn't met, the insurer won't pay. This is why the wording of a policy is as important as the price. Two policies can cost almost the same and still cover you very differently.
You can spend the money on anything you need. Many people use it to pay off their mortgage, but it can also go towards medical treatment, changes to your home, childcare, or everyday bills while you're too unwell to work. The insurer doesn't tell you what to spend it on.
Critical illness cover pays out when you're diagnosed with a serious illness. This makes it different from two other types of cover. Life insurance pays out when you die. Income protection pays you a monthly income for as long as an illness or injury stops you working. Each one protects you against a different situation, and many people hold more than one at the same time.
What does critical illness cover include?
Critical illness cover pays out for serious illnesses named in your policy. Every policy has to cover cancer, heart attack and stroke as a minimum, because the Association of British Insurers sets that as the industry standard. Those three are behind the large majority of claims. Most policies go further and cover around 40 illnesses, while some cover 100 or more.
Here are the conditions almost every policy includes, and what generally has to be true for each one to pay out:
| Condition | What's usually needed to claim |
|---|---|
| Cancer | A cancer that has reached a defined severity. Very early-stage or non-invasive cancers may pay less, or nothing. |
| Heart attack | Medical evidence of a heart attack of a set severity, confirmed by tests. |
| Stroke | A stroke that leaves lasting effects, not a temporary one that fully resolves. |
| Multiple Sclerosis | A confirmed diagnosis, usually with some continuing symptoms. |
| Kidney Failure | Both kidneys failing permanently, needing regular dialysis or a transplant. |
| Major organ transplant | You've had, or are on the waiting list for, a transplant of a major organ. |
| Total permanent disability | An illness or injury that permanently stops you working or looking after yourself. |
The exact wording is set by each insurer, meaning two policies covering the same illness can still pay out differently. A policy might list "heart attack," but its definition decides how severe the heart attack has to be before you're paid. This is the part that's hard to judge on your own.
More expensive critical illness cover policies tend to cover longer lists, adding conditions such as Parkinson's disease, motor neurone disease, Alzheimer's and other forms of dementia, and loss of sight, hearing or speech.
How much critical illness cover do I need?
Start with enough critical illness cover to pay off your mortgage. For almost everyone, the mortgage is the largest bill, and clearing it means you keep your home even if you can't work again. Many people then add three to five times their yearly salary on top, which leaves a lump sum to live on while they recover.
To get closer to your own figure, add up what you'd need to cover and take off any protection you already have. That means looking at:
What's left on your mortgage
Any other debts, such as a car loan or credit cards
The income you'd need to replace, and for how many years
Extra costs like childcare, or changes to your home if an illness affects how you move around
Two people can land on very different numbers depending on their debts, their family and their income. A single first-time buyer might cover just the mortgage, while a couple with children often need considerably more. These examples show the range:
| Situation | Chosen Cover | What it's for |
|---|---|---|
| Single, £180,000 mortgage, no children | £180,000 | Pays off the mortgage in full, keeping the home safe |
| Couple, £250,000 mortgage, two young children | £300,000 | Pays off the mortgage and replaces income for a year or two during recovery |
| Single, £120,000 mortgage, wants a recovery buffer | £120,000 | Pays off the mortgage and covers around two years of living costs |
It's easy to pick a round number that sounds big and still falls short. A figure like £50,000 can look generous until you're paying off debts and covering bills through a long illness, when it runs out fast. If you want a figure worked out around your own mortgage, income and family, speak to one of our advisers and we'll size it with you.
Can you combine critical illness cover with life insurance?
Yes. You can buy critical illness cover on its own, or add it to a life insurance policy so both sit on one plan. Combined cover is the more common choice, mainly because it's cheaper, usually around 20% to 40% less than paying for two separate policies.
Combined cover has one important limit. Most of these policies pay out only once, on whichever happens first, a critical illness diagnosis or your death. If you claim for a critical illness and the policy pays, the policy then ends, and there's no life cover left. Your family wouldn't get a second payout when you die.
Two separate policies cost more, but each can pay out on its own. You could claim on the critical illness policy after a diagnosis, recover, and still leave your family the full life insurance payout later. If people depend on your income, two separate policies protect them even after a critical illness claim.
You can read more about cover that pays on death on our life insurance page.
How often does critical illness cover pay out?
Insurers paid out £1.3 billion in critical illness claims in 2024, with an average payout of £67,600, according to the Association of British Insurers. Across all protection insurance, more than 97.9% of claims are paid. When a claim is turned down, it's almost always for one of two reasons, and both can be avoided.
The first is non-disclosure. If you don't tell the insurer about a health condition when you apply, they can refuse the claim later, even if the thing you left out feels small or unrelated. The second is the diagnosis not fitting the policy's definition. The illness is real, but the wording sets a bar it doesn't reach, such as a cancer caught very early, or a heart attack the policy doesn't count as severe enough.
You avoid the first by answering every medical question on the application fully and honestly. You avoid the second by choosing a policy whose definitions are broad, rather than the cheapest one you can find.
This is why people use an adviser for critical illness cover. We check the application is complete before it goes in, and we compare the definitions across insurers, so the policy you end up with is one that pays when you claim.
Why work with Vintage Wealth Management.
Why work with Vintage Wealth Management.
Every household's protection needs are different, and the value in critical illness cover comes down to the detail, the definitions behind the cover, how it fits with your life insurance and income protection, and the amount that would clear your commitments in full if you had to claim. This is what we work through with you.
Vintage Wealth Management has been advising on protection and financial planning for over a decade. We're named in the FT Adviser UK Top 100 Financial Advisers every year since 2021.
Our team includes Chartered Financial Planners and Fellows of the Personal Finance Society, and we recommend across the whole market rather than from a single insurer.
We've got offices in Central London, North West London, Portsmouth, Buckinghamshire, Swindon, and Dublin, and we work with clients across the UK.
Get in touch and we'll take it from there.
Frequently asked questions about critical illness cover
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For many people, yes, especially if you have a mortgage or a family relying on your income. Around 22% of claims are made by people under 40, so it isn't only a concern for later life. Whether it's right for you depends on your commitments and any cover you already hold.
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There's no set age, but taking it out younger usually means a lower premium, because premiums rise as you get older and any health issues you develop can push the price up or lead to exclusions. Buying while you're fit and healthy tends to lock in a cheaper rate for the term.
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Often, yes. A pre-existing condition doesn't automatically rule you out. The insurer will ask about your medical history and may cover you at a higher premium, or exclude claims linked to that specific condition. Declaring everything at the application stage is what keeps your cover valid.
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You're covered as soon as the policy starts, though some policies apply a short waiting period at the beginning for certain conditions. A claim needs a diagnosis that meets the policy's definition, and you have to survive a set number of days after diagnosis, usually 10 to 28.
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They do different jobs, and many people hold both. Critical illness cover pays a single lump sum if you're diagnosed with a listed illness. Income protection pays a monthly income for as long as any illness or injury keeps you off work, including ones a critical illness policy wouldn't cover.
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No. If you hold a personal policy and pay the premiums yourself, the lump sum is tax-free, because it isn't treated as income. Two exceptions apply: cover paid for by an employer can be taxed, and a combined life and critical illness payout made after death can face Inheritance Tax unless the policy is written in trust.
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It depends on the type. Policies cover malignant melanoma, the serious invasive form, once it reaches a defined severity. The more common, less dangerous forms, such as basal cell and squamous cell carcinoma, usually aren't covered, because they're very treatable and rarely life-threatening. Check the wording if this concerns you.
Disclaimer
The information supplied is based upon our understanding of current UK law and HM Revenue and Customs (HMRC) practice. Tax law and HMRC practice may change from time to time. The value of any tax relief will depend on the individual circumstances of the investor. Critical illness cover pays out only while the policy is in force. Cover ends if premiums stop, or when the term finishes if you outlive it, and no benefit is returned. Premiums, cover, exclusions and terms vary between insurers and depend on factors including your age, health, occupation and lifestyle at the time of application. Failure to disclose relevant information when applying may affect a claim. Premium figures quoted are illustrative and not a quotation. The Financial Conduct Authority does not regulate tax planning, trusts, or will writing. The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied, is given in relation to such information. Vintage Wealth Management or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.