Critical Illness Insurance Guide

Sometimes, life sucks and it can feel like everything’s conspiring against you. You know the feeling — like when your secret chocolate stash is empty, or you get soggy cuffs while washing up or if your doctor’s just uttered the words “I’m sorry to have to tell you…”.

But while you can sort out a click and collect or remember to roll your sleeves up, finding out you’ve been fast-tracked to meet your maker is a curveball not quite so easy to dodge. Luckily, that’s where critical illness insurance comes in. And while it can’t make all the bad stuff go away, it can make life financially easier, here’s how it all works.

What is critical illness insurance

Critical illness insurance is a product that pretty much lives up to its name. It’s a type of insurance that pays out a chunk of money if you’re diagnosed with a condition covered in your policy. At DeadHappy we offer a very similar insurance called near death insurance. You can buy cover in one of three ways:

  • Additional cover alongside your life insurance policy. These policies pay out twice so you’ll get some of the cash when you’re diagnosed with a critical condition and the rest of it goes to your loved ones if you die within your policy term.
  • Combined cover as part of your life insurance policy. This type of policy only pays out once, either when you’re diagnosed or when you die.
  • Joint cover for two people. These usually work on a ‘first death’ basis so the last partner standing gets the payout.

The lump sum can be spent on anything you or the people you leave behind want to spend it on. Whether that’s paying off the mortgage, covering uni fees or just ticking off bucket list cliches like sky-diving.

What conditions are covered by critical illness insurance?

The conditions covered by your insurer will be listed in your policy. It’ll read like the dictionary of doom, but it’s important to know what’s included because different policies cover different things. At DeadHappy, under our Near Death policy, we cover pretty much the worst things that could happen to you, for example:

  • Cancer - thanks to the marvels of medicine, not all cancers will kill you but we’ll compensate you for stage 2 cancer and beyond.
  • Serious heart attack - the sort that ends up with your heart not working properly and making everyday activities a bit more tricky.
  • Serious stroke - we’ll pay out for the types of stroke that leave you with a permanent disability or damage to your nervous system.
  • Multiple sclerosis - you’ll be covered if you’re left with persistent damage to your motor skills or sensory functions.

So, while being diagnosed with one of the big bad four is never a good thing, you will at least be eligible for a cash payout that can help you cover debts and ease family finances.

What isn’t covered by critical illness insurance?

No insurance policy would be complete without a list of exclusions. These are all the things that you won’t be covered for and because insurers set their own rules, they can vary between policies.

In most cases you won’t be covered for pre-existing conditions, this is anything you already have or have been diagnosed with in the past. So, if you had a heart attack three years ago, you probably won’t receive a payout if you have another one.

With that in mind, it’s really a very good idea to read the terms and conditions in your policy. We know it’s dull and we know there’s a lot to read but knowing exactly what is and isn’t covered will save huge amounts of stress if you ever need to claim.

Is it worth buying critical illness insurance?

If we’re honest, that’s not something we can answer for you. We’re not passing the buck, but critical illness cover is much like any other safety net — unnecessary until it’s not.

After all, if you have it and don’t need it, you might be slightly annoyed but if you need it and don’t have it...well, then you’ll be really annoyed, and could be out of pocket if you can’t work because of your condition.

To help you make your mind up, here’s when you might not need critical illness cover:

  • You’ve got enough savings to keep you in the lifestyle you’re accustomed too, even if you can’t work.
  • Your partner can keep you both afloat.
  • You’re lucky enough to have a benefits package through work that covers illness or injury.

And here’s when critical illness cover could come in very handy indeed:

  • You don’t have any or enough savings to cover regular expenses.
  • You’re the main breadwinner and the folks back home rely on your income (nothing like pressure is there).
  • You don’t have the luxury of a work benefits package.

What’s the difference between critical illness insurance and life insurance?

Critical illness insurance pays out if you’re diagnosed with a condition listed within your policy. Life insurance only hands over the cash to your loved ones when you die. So, if you’ve got life insurance with additional critical insurance cover, you and your beneficiaries will be compensated whether you survive or die — it’s a win-win.

You can also specify how you’d like your life insurance payout to be spent (we like to call them Deathwishes). Whether that’s paying for your own send off or leaving a lovely wad of cash to someone, it’s totally up to you. If you want to know more about life insurance, here’s when to think about it and whether it’s a worthy investment.

How is critical illness insurance different to terminal illness cover?

Critical, terminal — it might feel like pernickety semantics but they really do mean very different things when it comes to cover.

Critical illness insurance pays out when you become ill with a serious condition. In other words, what you’ve got is bad but it’s not going to kill you for a while unless of course you refuse to follow your doctor’s orders.

A terminal illness is a condition that you’re likely to die from within 12 months.

One good thing is that most life insurance policies also cover terminal illness and will pay out your lump sum when your doctor confirms the diagnosis. Some policies will also pay out if you’re seriously injured and suffer permanent disability. But remember — while most policies offer this, it’s not a guarantee so read the small print.

Health insurance vs critical illness insurance, what’s the difference?

This is where things can get a little bit confusing, but bear with us. There are two types of health insurance. The first is probably what most of us think of — the sort that offers private care and a choice of how, where and when we’re treated. This is obviously very different from critical illness insurance because it’s about supplementing NHS healthcare as and when you need it.

But there’s another type of health insurance which is sometimes called permanent health insurance or income protection insurance. In truth, it’s very similar to critical illness cover so they’re easily mixed up.

The main difference is that instead of handing over a whole load of cash in one go, permanent health insurance pays you a percentage of your salary over a period of time (which you agree with the insurer). You can still spend the money on what you want but it’ll only be a fraction of your regular monthly salary (typically between 60%-80%).

It’s easiest to think of permanent health insurance as offering you a temporary income to tide you over while you’re just a little bit ill or injured and can’t work.

How much does critical illness cover cost?

How much is your food shop compared to the people next door? It’s probably quite different because you like different things. It’s a bit like that when it comes to the cost of critical illness insurance which depends on all sorts of things specific to you, for instance:

  • Your age — if you’re relatively young, you’ll pay less than someone twice your age because getting old is rubbish and increases the chances of getting ill.
  • Your health and lifestyle — if you’re fit and an all-round healthy bod then you’ll pay less than say, an overweight chain smoker who thinks exercise is walking from the sofa to the fridge.
  • Your job — the riskier your job, the more you’re likely to pay.
  • How long you want the policy for — also known as the insurance term. The longer the term, the more you could end up paying as the potential for illness increases with age. Having said that, a short insurance term doesn’t mean you pay less overall — what can we say, it’s a balancing act so do what’s right for you.

Of course, you can also just tag your critical illness cover onto a life insurance policy which can make things a whole lot easier.

Can I claim for critical illness more than once?

No, critical illness policies will only pay out once.

If I don’t make a claim, do I get my money back?

If you don’t win the lottery, do you get your money back? No.

Same goes for critical illness cover, your reward for not claiming is living a healthy life — what more could you want?

Isn’t critical illness cover tempting fate?

We can’t stop you from thinking this, but it’s highly unlikely that taking out a critical illness insurance policy will result in your health taking a calamitous turn.

It can however give you a little peace of mind, knowing that if you do get struck down by some terrible illness, there’ll be cash on hand to make it all just a bit more bearable.

Considering our Near Death cover or still not sure? Take a look at what other people have to say about it all, because there’s nothing like someone else’s oar being stuck in to make things clearer.