Is critical illness insurance worth it? Pros and cons

MoneyHelper weighs it against how much your family relies on your income, your savings and any cover from your employer.

MoneyHelper suggests considering critical illness cover if:

• you and your family depend heavily on your income
• you don't have enough savings to tide you over a serious illness or disability. You might face costs beyond normal bills, such as adapting your home or transport to appointments
• you don't have an employee benefits package to cover a longer time off work due to sickness

MoneyHelper says you might not need critical illness cover if:

• you have enough savings to cover ongoing expenses such as bills, rent or mortgage payments, as well as the extra costs of a serious illness or disability
• you already have some cover as part of your employer's employee benefits scheme

How your own situation fits in

• If people depend on you, MoneyHelper says critical illness insurance on its own might not give them suitable cover, because it doesn't usually pay out if you die. It's often combined with life insurance, which supports your dependants after you pass away. See how the two can be set up together.
• If you're self-employed, you have no employer to rely on for sickness cover, and you won't get sick pay. You might qualify for benefits such as Employment and Support Allowance (ESA). Many self-employed people consider income protection and critical illness cover. See life insurance for the self-employed.
• If you share a mortgage, critical illness cover is often set up in joint names because it can be used to protect the loan.

Standalone or combined with life insurance

You can buy a standalone policy or combine cover with life insurance. Combined cover, called accelerated critical illness cover, pays out once on whichever happens first: a critical illness diagnosis or your death.

Far more critical illness cover is sold with life cover than on its own. Of the 2 million new individual pure protection policies (such as term life, critical illness and income protection cover) sold in 2024, 0.4 million were term policies with accelerated critical illness cover. Just 88,000 were standalone critical illness policies.

You get a tax-free lump sum if you're diagnosed with a listed condition, and most claims are paid: 90.2% of new claims in 2025. You could use the money to pay off your mortgage, cover rent or bills, pay for treatment or adapt your home.

• It pays a tax-free lump sum if you're diagnosed with a condition listed in your policy. HMRC's manual says a critical illness lump sum isn't taxable as income for the person who receives it.
• ABI members that sell critical illness cover must cover three core conditions: cancer, heart attack and stroke, to at least the standard definitions in the ABI's Guide to Minimum Standards.
• Most claims are paid: 90.2% of new critical illness claims were paid in 2025 across individual and group policies (see how many claims are paid).
• You can set the cover amount to suit your needs and what you can pay each month. Policies run for a set term, with level cover (the payout stays the same), decreasing cover or increasing cover.
• Some policies make a smaller payment for less severe conditions, or if one of your children has a covered condition.
• If you choose guaranteed premiums (your monthly payments), they stay fixed for as long as you hold the policy.
• If your insurer fails, the Financial Services Compensation Scheme (FSCS) repays eligible claims in full for firms that failed on or after 3 July 2015 (90% before that date).
• You have 30 days from buying the policy to change your mind and get a full refund.

Only the conditions listed in your policy are covered, and your illness must meet the policy's definition. A policy usually pays out once and then ends, and MoneyHelper calls it a potentially complicated product.

• Covered conditions and their definitions can vary significantly between insurers. The most comprehensive policies cover 50 or more conditions, while others are much more limited.
• Most policies state how serious a condition must be to qualify (see what counts as a heart attack), and some won't pay out for the early stages of common cancers. MoneyHelper says an unpaid claim can bring a lot of stress and heartache.
• Common exclusions (what isn't covered) include non-invasive cancers, hypertension (abnormally high blood pressure) and injuries such as broken bones.
• Common illnesses that keep people off work, such as back problems and stress, aren't covered. And it pays one lump sum, so it won't keep paying each month while you're off work, as income protection does.
• A critical illness policy usually pays out once, and then it ends. On a combined life and critical illness policy, that means the life cover ends too. Some policies, such as Assura Protect's and Vitality's, allow more than one claim (see the FAQs).
• You may face a survival period (the time after an insured event, such as diagnosis, you must survive to be paid). Aviva says most critical illness policies have one, usually 10 to 14 days depending on the product.
• If you're seen as at risk of a condition, perhaps because of existing health issues, that illness could be excluded or your premium could be higher.
• Premiums can vary widely with the policy and your circumstances, and wider cover tends to cost more. Reviewable premiums are usually reviewed every five years, and MoneyHelper says they're likely to go up at each review.
• If you cancel after the 30-day refund window, there are usually no cancellation fees, but you won't get back premiums already paid or be able to reinstate the policy.

About nine in ten. Insurers paid 90.2% of new critical illness claims in 2025, across individual and group policies. The ABI and Group Risk Development (GRiD) figures cover 20,498 paid claims worth £1,422 million, and the share counts claims, not money.

Payouts on individual policies have topped £1 billion a year for five years in a row. Cancer made up almost two-thirds of individual claims in 2025.

In its final report on pure protection products, the FCA found that claims acceptance rates are high and that insurers generally pay out over 50% of premiums in claims. For each insurer's own published figures, see our guide to critical illness payout rates.

Why are claims turned down?

In its 2024 figures, the ABI named two common reasons for declined protection claims: not disclosing existing medical conditions when applying, and not meeting the policy definitions. If you don't answer truthfully or leave something out on your application, your claim might be rejected.

Less than you might expect. If a serious illness stops you working, employees are usually moved onto Statutory Sick Pay within six months. MoneyHelper says benefits might not be enough to replace your income.

• To qualify for SSP, you must be classed as an employee, have done some work for your employer and have been ill for at least one full working day.
• Your employer pays SSP in the same way as your normal wages, with tax and National Insurance deducted. At the full weekly rate, 28 weeks of SSP totals £3,451 before tax and National Insurance.
• When SSP ends, or if you don't qualify, you may be able to apply for Universal Credit or ESA. You can apply for ESA if you're employed, self-employed or unemployed. New Style ESA requires enough National Insurance contributions, usually in the last 2 to 3 years.

You can also pay extra to add waiver of premium to a critical illness policy. It covers your monthly premiums if illness or injury stops you working, though it usually only starts once you've been off sick for at least six months.

Critical illness cover pays a one-off lump sum for specific illnesses, while income protection pays a regular replacement income. Income protection pays out if illness or an accident stops you working, until you return to work, retire, die or the policy ends.

You can have both. Critical illness insurance is typically taken out alongside life insurance or income protection, and income protection covers most illnesses that stop you working, including stress-related illness and mental health conditions.

• Income protection vs critical illness: how the two compare in detail
• Income protection insurance: a monthly income while you can't work
• Income protection calculator

Check how much cover you need, which conditions and definitions apply, and whether the premiums are guaranteed. Your premium will depend on your age, whether you smoke or have smoked, your health, your job and the level of cover.

1. Work out how much cover you need MoneyHelper says the amount you need depends on your mortgage or rent payments, other debts, dependants, take-home pay, work benefits and any other insurance you hold.
2. Compare the conditions and exact definitions The conditions covered can vary significantly between insurers, and so can the definitions and exclusions. MoneyHelper says to make sure you know exactly what is and isn't covered.
3. Check whether premiums are guaranteed or reviewable Guaranteed premiums stay fixed for the life of the policy. Reviewable premiums are usually reviewed every five years, and MoneyHelper says they're likely to go up in line with inflation at each review.
4. Give the insurer all the information it asks for Answer every question truthfully and accurately. If you leave something out, your claim might be rejected. There are specialist brokers and insurers for people turned down because of an existing medical condition.
5. Read your policy documents during the 30-day window You have 30 days from buying the policy to change your mind and get a full refund.

• How much critical illness cover do I need?
• Critical illness calculator
• Critical illness cover: how it works and what it covers