Critical Illness Insurance

Critical illness insurance is a product that pays out a lump sum if the policyholder is diagnosed with a specific illness. Sometimes known as critical illness cover, this type of policy may also cover serious injury.

What is critical illness insurance?

Critical illness insurance is a type of insurance policy that typically pays out a cash lump sum if the policyholder is diagnosed with a specific illness or is seriously injured.

This type of insurance is for anyone but is more favourable for those with financial commitments such as a mortgage or children.

When a policy is taken out, you decide the length of the term or in other words, how long the cover will last. This gives you the peace of mind that if something should happen that keeps you out of work for an extended period of time, even permanently, your mortgage or other expenses will be covered.

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How does critical illness insurance work?

To get a quote, you will need to provide some details about your medical history. This is so that an insurer can give you a quote based on how much of a risk you are.

A critical illness policy will be paid in monthly instalments called premiums. As long as your premiums are being paid, a tax-free lump sum is paid out if you suffer from one of the conditions covered by the policy. 

Once payment has been made, the policy will end automatically. Some insurers offer severity-based cover. This is where the payout depends on how bad your illness is.

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What does critical illness insurance cover?

The type of illnesses and injuries which are covered are usually a predetermined list defined in the policy. Not all conditions are covered and the policy will also define what is considered serious.

You should always check which conditions/injuries are included with the policy but some examples include:

  • Heart attack
  • Stroke
  • Neurological conditions such as multiple sclerosis

You may want to consider critical illness insurance If you do not have enough savings to cover costs should you need to stop working. The amount of cover you need will be dependent on your circumstances.

It’s important to remember that critical illness insurance will not usually cover any illnesses you had when you took out the policy. This doesn’t mean you can’t get cover following after a diagnosis but this will be dependent on the provider and the type of illness.

Critical illness insurance should not be confused with life insurance. The two products are sometimes sold together, either individually or as a combined product.

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