What is critical illness insurance & how does it work?

3 Mins read

Much like death, illness can strike when it’s least expected. So how can you ensure your family is protected? Critical Illness Insurance is designed to help you pay for medical expenses that may arise if you become seriously ill or injured. Learn just how it works in this article…

What is critical illness insurance?

Critical illness insurance is a type of life insurance cover designed to provide you with financial support if you were to fall seriously ill or injured. It can assist in covering costs for any necessary medical treatments and care as well as living costs while recovering from an injury or illness.

If you have a pre-existing medical condition — like heart disease or diabetes — you may not qualify for traditional health insurance. But CII policies usually cover people who have had these conditions in

How it works:

Your insurer pays out a tax-free lump sum in the event you are diagnosed with a critical illness or injury specified in your insurance agreement. Much like standard life insurance you decide on the amount of cover as well as paying monthly premiums to your provider.

Note that if you have a pre-existing condition — like heart disease or diabetes — you may not qualify for critical illness insurance.

Critical illness cover can be purchased as an add-on to an existing life insurance policy or as a separate policy altogether.

There are two main types of life insurance cover – whole life & term life. Each of these policies works in different ways resulting in different costs.

Whole life insurance

  • Covers you for the rest of your life, paying out a lump sum when you die.
  • Your premiums and pay-out value remain fixed throughout the policy
  • One of the most expensive types of life insurance, however, your family is virtually guaranteed a pay-out. This is ensuring that you continue to pay your monthly premiums until you die.

Term life insurance

  • Term life insurance provides coverage for a set period of time (i.e 25 years)
  • The policy pays out if you die within the policy term, if not the cover expires and you won’t receive any money for the premiums paid.
  • Typically cheaper than other types of life insurance as it only covers you on a temporary basis.

The cost of critical illness insurance cover varies depending on your age and health. You will also be required to decide whether you want the policy to be permanent (i.e. until you die) or temporary (i.e. for a set period of time).

The benefits of having critical illness cover

  • It can help pay for medical bills if you become critically ill.
  • Covers any payments you may struggle to pay if you fall ill
  • It can be used in conjunction with other insurance policies.
  • Your family will be protected even if you lose you are unable to work or claim sick-pay

Illnesses typically covered by critical illness insurance

The illnesses and injuries covered under a Critical Illness policy rely on the insurance provider. Not all providers cover the same conditions, therefore it’s best to read through the policy agreement to understand what is fully covered.

Some conditions are almost always covered, others can depend on the provider…


  • Heart attacks
  • Strokes
  • Non-terminal cancer
  • Organ transplants

Sometimes covered:

  • Multiple sclerosis (MS)
  • Parkinson’s
  • Severe head injuries
  • Loss of limbs

Not covered:

  • Terminal illnesses
  • Pre-agreed conditions
  • Drug and alcohol abuse

Terminal illnesses are not covered by critical illness cover – for that you would need terminal illness cover. This policy pays out if you are diagnosed with a terminal illness in which you have a life expectancy of 12 months or less.

Determining the cost of critical illness insurance

There are several factors that can determine the cost of your policy such as:

  • Age
  • Health
  • The length of the policy
  • Your smoker status

The older you are the more you can expect to pay for critical illness insurance cover. This is due to the fact there is a greater chance of developing an illness or medical condition compared to when you’re young.

Whilst bad for your health smoking also impacts the cost of your policy. It’s well documented that smoking can cause long-term health conditions as well as cancer. With that in mind, your insurer will deem you as a greater risk of making a claim compared to non-smokers. Because of this, your premiums are typically higher than they would be for others.

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