Critical Illness Cover

Critical illness cover suits anyone who would struggle financially through a serious illness. It is often worth considering when:

• You have a mortgage or rent that would still need paying if you were off work for months.
• Your family relies on your income.
• You are self-employed and have no sick pay.
• Your savings wouldn't cover treatment, home changes or a long recovery.

Do I need it if I have life insurance? Life insurance pays if you die. Critical illness cover pays if you survive a serious illness and need time and money to recover.

1. You choose an amount and a term, often to match a mortgage or a number of years of income.
2. You take it on its own, or combined with life insurance. A combined policy pays once, on diagnosis or death, whichever comes first, and then ends.
3. If you're diagnosed with a covered condition that meets the policy's definition, the insurer pays the lump sum. Some policies require you to survive a short period after diagnosis.
4. You decide how to use the money, for example to clear or reduce your mortgage, replace lost income, or pay for treatment, care or adaptations.

Many policies also make additional payments for less severe conditions, such as some early-stage cancers. Many include children's cover at no extra cost.

The definitions matter more than the number of conditions. For the most common claims, cancer, heart attack and stroke, insurers follow minimum standards set by the Association of British Insurers. Beyond that, definitions vary. We compare them for you before you decide.

How much cover. There is no single formula. People often base it on one or more of these:

• Their outstanding mortgage.
• One to two years of take-home income, to allow time to recover.
• The likely cost of treatment, care or changes to the home.

What it costs. The price depends mainly on your age, health and smoking status, the amount of cover and the length of the policy. It also depends on whether the cover is level or decreasing, and whether it's combined with life insurance. Critical illness cover usually costs more than life insurance alone, because a claim is more likely.

Tax. A payout from a personal policy is normally tax-free.

• It doesn't pay for every illness. It only pays for the conditions listed in the policy, when they meet its definition.
• Less advanced conditions may pay a smaller amount, or nothing, depending on the definition.
• It doesn't pay a monthly income. For that, see income protection.
• A combined policy pays once. After a critical illness claim, the life cover ends too.
• It can exclude conditions you've had before. We'll tell you about any exclusions before you accept.