How much critical illness cover do I need?

7 minutes

Critical illness cover helps to provide financial security if you are diagnosed with a critical illness or condition.

The impact of such a diagnosis often means your finances will take a hit, whether that’s due to increased medical costs, travel expenses or simply the fact you need to be off work for a longer period of time.

Due to the impact a serious diagnosis can have on your life, some choose to take out a life insurance policy with critical illness cover alongside it. While life insurance would cover you if you passed away, critical illness cover also covers you for a number of serious illnesses and conditions . It will provide you a lump sum of money if you’re diagnosed with a serious life-changing illness, or suffer certain life changing injuries following an accident.

The information on this page should not be considered as financial advice. If you are unsure what’s right for you, please make sure you speak to a financial adviser.

What counts as a critical illness?

Critical illnesses are life changing diagnoses, where the diagnosis results in permanent symptoms, or results in having to undergo major surgery such as organ transplantation. LV= covers a wide range of illnesses and conditions, (although if you already have a policy with us, you may find you’re covered for some different illnesses, so it’s important you check your policy conditions, so you know exactly what you’re covered for), Whether you receive a medical diagnosis or go through a life changing accident, your critical illness policy could cover you.

How do you know how much critical illness cover you may need?

While there’s no “right” answer, there are a few steps you can take to help you understand how much critical illness cover you might choose to get. Consider how you would support your family or pay the bills if something happened to you, and whether life insurance with critical illness could help you.

The following considerations should be made: 

  • How your regular outgoings will be maintained. 
  • How having a serious illness might affect you and your family, especially financially.

These two considerations will help you start to determine how much cover you should consider getting.

As well as the above considerations, you should also consider:

  1. What your regular monthly income is, including any benefits, dividends, or other assets you may have.
  2. Your current monthly outgoings, from essentials to nice to haves.
  3. Any future potential changes to your monthly outgoings, such as a mortgage being paid off, or helping your children with university fees.
  4. How much you have in savings and assets that you would be willing to use to potentially cover any shortfall.

What factors should you consider when taking out critical illness cover?

1. Your home

Your property is one of the biggest investments of your life and worth protecting. If you were to die or suffer a serious life-changing illness, it will be a big help to you and your family if the mortgage was to be paid off.

Similarly, if you rent, consider how much you’d need to cover your rent, plus any potential increases that may be in your contract. While it’s hard to know exactly how much you may be paying in rent in years to come, you could apply an estimated increase every year to help you figure it out. 

2. Your children

If you have children, you already know that they do impact your monthly expenses and the bills may get bigger if they want to go to university. Consider how much they cost you to raise them to adulthood and if you want any potential education fees included. If you’ve already got older children, what about their children, or helping to set your family up for life?

If you fell seriously ill, would you need to pay for additional care and support for your children, or would you need to move somewhere more suited to your condition? Similarly, you may want to consider whether they need any mental health support during your illness, as that can often incur an additional cost.

3. Medical expenses

Even if you rely fully on the NHS, there can be associated expenses such as travel for treatment, alterations needed for your home, care assistance or even employing someone to help with tasks you can no longer do yourself.

This may also include alternative therapies or additional remedies, such as counselling, massage, chiropody or others that you find helpful in your recovery, even if your primary physician hasn’t prescribed it.

4. Think about the help you already have

If you have any assets such as savings, you might decide to use some of these instead to help provide a safety-net should you be diagnosed with a serious illness. If you do, you could then reduce the amount of cover you think you’ll need, by this amount. Other insurance policies you have, as well as any work-related benefits and could also be taken off too. You may also decide to consider reducing the cover you need by the amount of state benefits payable in the event of ill-health. 

Depending on what diagnosis you receive, you may be able to claim certain state benefits either permanently or for an extended period of time. Whilst they can provide additional income during a tough time, there’s no guarantee they’ll be available to you at the time, so that’s worth bearing in mind. 

How much could I be paying for critical illness cover?

This very much depends on your personal circumstances, and there are certain factors that affect what you might pay for critical illness cover, such as:

  • Your age. The older you are when you take out a critical illness policy, the higher your monthly premiums are likely to be.
  • What you do for work, as riskier jobs may be more likely to incur a higher monthly premium.
  • Any health and lifestyle factors, such as family medical history and whether you smoke.

Each critical illness policy is looked at uniquely and all circumstances are taken into consideration.

So how much critical illness cover should I have?

You may want to have as much cover as you have life insurance, as this provides the same level of cover for multiple circumstances, but critical illness cover can get more expensive very quickly. So, you could decide to reduce the amount of critical illness cover to meet your budget. After all, some critical illness cover is better than none. It’s up to you to decide what’s affordable, and if you’re unsure you should consider speaking to a financial adviser.

How you receive critical illness cover payments

If you need to claim on your critical illness insurance policy you’ll usually receive the payment as a one-off lump sum. This will help you to pay for any immediate costs, as well as helping towards any longer-term costs, whilst you adjust to life following your diagnosis, or undergoing surgery.

Here at LV=, we only offer critical illness cover in conjunction with life insurance, although other providers may offer this as a separate policy on it’s own.

It’s up to you to decide how much cover you need and, you should also make sure it’s affordable, so your cover can stay in place when you may need it most.

What if I really don’t know how much to have? 

If you've thought about all these things and are still unsure, you should speak to your financial adviser, who will consider your individual circumstances and run through your options. You can also call LifeSearch, who we've chosen to offer customers independent financial advice for protection products.