Getting Life Insurance is one of those things that most adults know they need to do at some point, much like making a Will and Lasting Power of Attorney. If you’ve made the choice to protect your family with Life Insurance, you may be wondering if you need to get Critical Illness Cover (CIC) as well. If you’ve already started looking into this, you’ve probably realised that adding Critical Illness Cover can push up your monthly premiums quite a bit, so what exactly does that extra money protect against and is it really worth it?
It’s important to understand that Critical Illness Cover isn’t just an extension of Life Insurance, it’s an entirely separate policy that protects you and your family from different events, and statistically more likely events at that. In other words, it’s more likely you’ll need to claim on your Critical Illness Cover than on your Life Insurance, which is why the former tends to be a bit more expensive. In this guide, we’ll explain the differences between Life Insurance and Critical Illness Cover and discuss whether you should consider getting both or not.
What is Life Insurance?
Life Insurance or Life Cover is a type of insurance that pays out a lump sum to the surviving family if the policyholder was to die or be diagnosed with a terminal illness (with less than 12 months to live). Although it can be difficult to think about, there is always a chance that something may happen to you or your partner that could leave your family in a vulnerable financial situation.
If an income was lost due to death, would your family be able to afford the mortgage? If they had to sell the family home, how would this affect their quality of life? If savings had to be used to pay the mortgage, how would this affect their future plans? These are some of the questions that may determine whether Life Insurance is the right choice for you.
Depending on the level of cover you choose, your family could receive a lump sum to pay off the mortgage and help with other expenses long into the future. Life Insurance can give you the peace of mind that your family’s home, quality of life, and savings will be protected if your loved ones are ever unable to pay the mortgage due to the death of a working parent.
You can find out more about whether you should get Life Insurance by reading our guide, ‘Do I Need Life Insurance?’ or learn more about the different types of Life Insurance by reading our guide, ’What Life Insurance Should I Get?’
What is Critical Illness Cover?
Critical Illness Cover is a type of insurance that pays out a lump sum to the policyholder if he or she is diagnosed with a specific illness or disability. These policies usually cover 50-100 conditions that could put you out of work for an extended period of time – such as cancer, heart attack, stroke, and disabilities.
Like Life Insurance, Critical Illness Cover is also designed to protect your family financially, but the difference is that this protection kicks in at the point of illness or injury, not death. Therefore, the questions you need to ask are fairly similar. How would you afford your mortgage, bills, childcare costs and other expenses if you were unable to work? Would you need to sell your family home if you lost an income for an extended period of time? If you had to use your savings to get by, how would this affect your future plans? Additionally, would you be able to afford private medical care if you ever needed it? And how would financial struggles affect your recovery from illness or injury? Critical Illness Cover could help you get back on your feet and back to work quickly by giving you access to private medical care in your time of need and by reducing financial stress. Some people even use the payout to enjoy relaxing holidays whilst they recover from an illness or injury.
Although there may be some help available to you through sick pay or benefits, this is usually not enough to protect your family home and quality of life for very long. This is why Critical Illness Cover is one of the most common forms of insurance in the UK.
With the right level of cover, your family could receive a lump sum to help cover mortgage payments, bills, and medical expenses until you are able to return to work. Critical Illness Cover can give you the peace of mind that your family’s home, quality of life, and savings will be protected if you are ever unable to work due to illness or injury. You can find out more about Critical Illness Cover here.
How Much is Life Insurance in the UK?
The cost of Life Insurance in the UK will vary depending on a number of factors, such as your age, health, lifestyle, and the type and amount of cover you choose. In general, however, these policies are much more affordable than Critical Illness Cover, because they only protect against the risk of death and terminal illness, but not other illnesses or injuries that could put you out of work.
To find out the exact cost of Life Insurance for your situation, please use our FREE Insurance Service. Whether you are a previous customer of ours or not, one of our friendly advisors can discuss your needs, search the market, and arrange your Life Insurance policy free of charge.
How Much is Critical Illness Cover in the UK?
As with Life Insurance, the cost of Critical Illness Cover in the UK will also vary depending on your age, health, lifestyle, and the type and amount of cover you choose. These policies tend to be more expensive than Life Insurance, but this is because they offer far greater protection as you’re more likely to be out of work due to illness or injury than due to death.
To find out the exact cost of Critical Illness Cover for your situation, please use our FREE Insurance Service. Whether you are a previous customer of ours or not, one of our friendly advisors can discuss your needs, search the market, and arrange your Critical Illness Cover policy free of charge. Most people tend to arrange these policies alongside Life Insurance, which saves time as most of the information insurers need from you is the same for both.
Life Insurance or Critical Illness Cover, Do I Need Both?
As we’ve explained above, both Life Insurance and Critical Illness Cover protect your family against a loss of income. However, Life Insurance protects against the loss of income due to death and Critical Illness Cover protects against the loss of income due to illness or injury. Therefore, in most cases, it’s recommended you take out both policies together. This way, you’re family’s home and quality of life will be protected against a far greater set of circumstances than just taking out one or the other.
Although Critical Illness Cover will be more expensive than just taking out Life Insurance on its own, it’s important to remember that you’re statistically more likely to have to claim on Critical Illness Cover during your working life. There are also ways to make these policies more affordable by finely tuning the type and length of cover, so please take advantage of our FREE Insurance Service to ensure you get the right policy for your situation.
Do I Need Critical Illness Cover if I Have Income Protection Insurance?
Income Protection Insurance also protects against the risk of losing your income due to illness or injury. However, unlike the lump sum payout you would receive from Critical Illness Cover, Income Protection could pay up to 60% of your gross income until you return to work or retire (or until the end of the policy if that comes first). You can learn more about Income Protection by reading our guide, ‘Do I Need Income Protection Insurance?’
Alongside Life Insurance, you may choose to take out both Critical Illness Cover and Income Protection Insurance if you want the highest level of cover for you and your family. It’s worth noting that you may be able to claim on both policies if your condition is severe. Critical Illness Cover could allow you to pay off your mortgage and access expensive medical treatments to help your recovery, whilst Income Protection could provide a long-term income for your family. However, depending on your financial situation, you may want to choose one or the other, and we can help you make that decision when you contact our FREE Insurance Service.
The Bottom Line
If you have a partner or children who rely on your income to pay a mortgage or rent, bills and living expenses, it’s highly recommended you take out Life Insurance. If your family relies on two incomes, you may want to consider a joint policy, where a lump sum is paid out if either policyholder dies. Critical Illness Cover is also recommended for those with dependents as well as those without. Where Life Insurance protects against a loss of income due to death, Critical Illness Cover will pay out if the policyholder is unable to work due to illness or injury, which is a more common occurrence than death during the average working life. Having both forms of cover in place will offer the greatest protection for you and your family, and therefore, the greatest peace of mind.
Since the Consumer Duty came into effect in 2023, we now have a greater legal duty to ensure our customers fully understand the potential consequences of not taking out insurance to protect against a loss of income. Whether you’re a previous customer of ours or not, we provide a FREE Insurance Service to help you find and arrange the right policy for your needs, so please get in touch with our team to find out more.
At Michael Usher Mortgage Services, we’ve been helping people with insurance for over 30 years. Our friendly insurance experts can help you find the right policy for your situation and arrange it for you free of charge. We understand the potentially devastating consequences of not having the right insurance in place, which is why we do all we can to protect our customers and their families.
Please book your FREE insurance consultation with one of our advisors to get going quickly. Our head office is on Frimley High Street, but we can also help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
Book your FREE insurance consultation here
Think carefully before securing any other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage.
