Critical illness cover is insurance that pays you a tax-free lump sum if you get a serious illness or disability that’s specified in the policy and you can’t work. It’s designed to give you and your family some financial breathing space at a difficult time, to help with things like paying the mortgage.

But there are a few catches, and there are other ways to get yourself covered. So we’ve explained how to decide if critical illness insurance might be right for you or not.

What is critical illness cover and how does it work?

If you became seriously ill, how would your family cope? Would they be able to pay the bills and the mortgage? Critical illness cover can be a financial lifeline at a time like this, providing money to pay bills and medical expenses while you and your family are dealing with your illness. 

It’s worth knowing that policies only pay out for specific conditions listed in the policy, and not all claims are successful.

Some insurers call it “serious illness cover”.

You decide the sum you want to insure and how long you want the policy to last. You might, for example, just want it to last until you’ve paid off your mortgage. There’s usually an upper age limit for taking out cover and the age it runs until is usually capped, too (typically 75).

During the term of the policy, if you’re diagnosed with one of the illnesses listed in the policy - typically long-term, serious conditions such as certain types and stages of cancer, dementia, stroke and heart disease - then you’ll be due a lump sum payout (called the benefit).

The payout will go to you, the policyholder, if you make a valid claim. Usually, once you’ve made a claim, the policy ends. But many policies allow partial claims for less serious illnesses, and cover still continues afterwards - more on this below.

Even if you have other income, such as benefits or sick pay, it might not cover everything you need it to. Critical illness insurance can help fill the gap.

Critical illness insurance is usually sold in a combination with life insurance but it’s also available as a standalone policy. 

You can get joint critical illness cover but it’s worth knowing that if one of you makes a successful claim, the policy would typically end.

Policies can also include children’s critical illness cover.

There are other types of cover that can temporarily replace at least some lost income if you get seriously ill and can’t work - mortgage payment protection insurance, for example. It could be worth discussing with an expert which one might suit you better.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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What does critical illness insurance actually cover?

The illnesses that critical illness insurance covers are typically long-term and serious. 

Policies vary but most cover several types of cancer, heart disease and heart attack, stroke, Alzheimer’s and other types of dementia, among other conditions.

The “big three” in terms of payouts are cancer, heart disease and stroke. Together, these account for around 80% of claims, according to the Association of British Insurers (ABI, 2024). 

Cancer was the most common reason for a critical illness claim in 2024, accounting for 62% of claims, according to the Association of British Insurers (ABI, 2024).

Cover for “total and permanent disability” is usually provided as part of critical illness insurance as additional cover for illnesses that aren’t listed. Payouts for this usually depend on you being unable to work and doctors being unable to find a cure for the disability.

Most illnesses listed would result in a full payout if you make a successful claim. But many policies also offer partial payouts for less severe conditions - called “additional critical illnesses”. 

So if you’re covered for £80,000, say, and your policy pays out 25% for early-stage cancer, then you’d get £20,000 and the policy would continue.

Commonly included conditions

Policies vary in what illnesses they cover and how they define them - including the level of severity of the illness. So it’s crucial to read the small print and understand what is and isn’t covered.

These conditions are typically on the list:

• Cancer (certain types and stages)
• Heart attack
• Stroke
• Multiple sclerosis
• Parkinson’s disease
• Dementia, including Alzheimer’s disease
• Blindness
• Deafness
• Kidney failure
• Liver failure
• Third degree burns
• Brain injury
• Loss of a limb

Common exclusions and the “pre-existing” rule

Critical illness doesn’t mean any illness, and many policies exclude minor injuries or illnesses, such as some types or stages of cancer. Or the policy may list them under a separate section where you’d get just a partial payout.

Policies don’t pay out for death. There’s usually a survival period of 10-14 days after diagnosis that you need to meet before you can claim. Life insurance, often combined with critical illness cover, does cover death.

Some policies pay out on diagnosis, but others require the condition to have progressed to a certain level of severity to meet the threshold for the payout.

Insurers are very unlikely to cover you for an illness or condition you know you already have: a “pre-existing illness”. More on this below, in “Applying with medical history”.

Is critical illness cover worth it?

How long could you go on paying all the bills if you were too ill to work? If you have enough savings or other ways to cover what you need, then critical illness cover might not be worth it.

The point of this cover is having the reassurance of knowing that you’d be able to pay your bills if you didn’t have your salary - it gives you extra “financial runway” while you recover or get used to a “new normal”.

Check:

• If you’re already covered by other insurance
• What benefits you’d receive through work if you get seriously ill or become disabled
• Whether your savings would be enough to cover what you need

The average critical illness insurance payout was £67,600 in 2024, and around 9 out of 10 claims were paid, according to the Association of British Insurers (ABI, 2024).

You won’t get any money back if you never make a claim.

Critical illness vs income protection

Critical illness cover is a one-off, lump sum. 

Income protection is an ongoing regular payment that covers at least part of your monthly salary. Mortgage payment protection insurance (MPPI) does this job. Find out more in our full guide to MPPI.

You can take out both if you want belt-and-braces cover, but it’s worth checking what your monthly outgoings are first so you don’t over-insure yourself.

If you’re ready to get covered, you can chat with Habito’s Protection Team for free and get personalised advice. We’ll search a panel of insurers and, where appropriate, recommend suitable cover based on what you tell us. Our advice is free to you.

Important: Policies may not pay out in all circumstances. Exclusions and terms apply. You must keep up premium payments for cover to remain in place.

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How critical illness cover protects your mortgage

Unlike mortgage payment protection insurance (MPPI) and its time-limited drip-feed of cash, critical illness cover could give you a lump sum that allows you to pay off your mortgage (watch out for early repayment fees, though). 

But you could also use the lump sum to cover monthly mortgage payments.

The level of cover you choose and the policy terms will affect whether a payout is enough to cover your mortgage in full.

Having enough cover for your mortgage payments or mortgage balance gives you a buffer that could save you from falling into mortgage arrears (being behind with your mortgage payments). Being in arrears can damage your credit rating.

Determining your level of cover

To decide how much cover you need, you could apply a formula such as:

Mortgage balance + 2 years’ salary - existing savings = lump sum needed

This will give you a lump sum total that will cover paying off the mortgage, with 2 years of financial breathing space, taking into account your savings.

With critical illness cover, you can get level cover, where the lump sum amount stays the same through the term, or decreasing cover, where the lump sum amount falls during the term. In both cases, the monthly premium stays the same, but decreasing cover is usually cheaper.

Decreasing cover could be a good option if you’re getting it to pay off a repayment mortgage, where the debt falls over time, as you can align it so the payout drops in line with the mortgage balance.

Applying with a medical history

When you apply for cover, you have to fill out a questionnaire about your health and the insurer might ask to see your medical records. It’s important you declare any pre-existing health condition you have when you apply. 

You’re unlikely to get cover for pre-existing health conditions (those you knew you had when you applied). If you don’t declare all previous conditions, the insurer may reject a claim you make later, saying it might not have offered you cover if it had known the full picture.

Insurers will exclude cover for existing conditions, but they’ll also take into account factors that make you more likely to claim, when they decide the cost of your premium.

How much does critical illness cover cost?

Critical illness cover costs around £25 a month on average in the UK, for a payout of £50,000 (based on figures from Iam Insured).  But prices vary a lot, depending on your age and your health, lifestyle and the level of cover you chose.

Figures are based on industry estimates and will vary depending on your personal circumstances.

Based on your health details, the insurer will decide on the premium. The older you are, the higher your premium is likely to be. Factors such as smoking, a family history of serious illness, or a high-stress job, will also bump up your premium as they make you more risky.

The price of cover can depend on policy factors and lifestyle factors - here are some examples.

How to get the best critical illness quote

Navigating different policies can be tricky and it’s important to shop around to get the right cover and the best quote. A broker such as Habito can search the market for you and help find a suitable policy that provides you with the cover you need and that fits within your budget. 

Chat with a Habito expert for free. We’ll search a wide range of insurers on our panel and, where appropriate, recommend suitable cover based on what you tell us. Our advice is free to you.

Important: Policies may not pay out in all circumstances. Exclusions, terms and conditions apply. You must keep up premium payments for cover to remain in place.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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‍Get protection

Habito is authorised and regulated by the Financial Conduct Authority.

Frequently asked questions

Does critical illness cover your mortgage?

Yes, it can do if you insure a lump sum that’s enough to cover the amount you owe on your mortgage and make a successful claim that’s paid in full. Bear in mind that the illness you get would need to be listed in the critical illness policy and there are various exclusions that could mean you don’t get a payout, or a full payout.

What are the top 3 critical illnesses

In terms of payouts, the top three are cancer, heart disease and stroke. Together, these three account for about 80% of claims. Cancer is the most common reason for a critical illness payout, according to the Association of British Insurers.

Does critical illness insurance cover mental health?

Usually no, for depression and anxiety. Critical illness insurance pays out only for illnesses specified in the policy and that usually excludes this type of condition but includes dementia, which is deemed a critical illness.

Most policies exclude illness or injury that results from intentional self-harm.

Will my children be covered automatically?

Not automatically with every policy, but many policies include some cover for your children. This cover usually pays out if your child gets an illness listed in the policy. The payout for a child is usually either set amount or a proportion of the amount the policy covers.

If you make a claim for a child, the policy usually continues so you’d be able to claim again for yourself if you were diagnosed with a critical illness.