A sudden critical or debilitating illness could place your financial stability at risk. Life insurance and critical illness cover protects you and your dependents from the financial effects of unforeseen illness or death.

What is life insurance and critical illness insurance?

Life and critical illness insurance are two types of insurance policies that can provide financial protection for you and your loved ones. The main difference between the two is when the lump sum payout is paid out. With life insurance, the payout is made to your beneficiaries after you pass away, while with critical illness insurance, the payout is made to you if you are diagnosed with a critical illness.

Critical illness insurance can be purchased as a standalone policy or as part of a life insurance policy. It covers you financially if you are diagnosed with a sudden or critical illness such as cancer, dementia, a heart attack or stroke. It's important to note that policies differ in the conditions they cover and the medical thresholds they apply. Some companies offer critical illness cover that covers more moderate conditions but payouts can vary with severity.

Why get life and critical illness insurance?

The main reason to take out a life and critical illness insurance policy is to provide financial protection for you and your loved ones in case of unexpected events such as death or serious illness.

Other benefits

  • It can help secure your family's future even if you have limited savings.
  • Enhanced peace of mind by being able to draw on a lump sum to cover liabilities, maintain your current lifestyle, or make adaptations to your home or even pay for private health treatment.
  • Tax-free.
  • Life insurance can be put towards unpaid debts for example your mortgage.
  • Some life insurance and critical illness policies will also offer additional benefits such as access to private GP consultations or specialists or offer other add on benefits.

Important considerations

  • What are you trying to protect, for how long and to what extent?  Think about the impact and the size of the financial cushion that would help. 
  • Your policy will require a ‘critical illness’ diagnosis from a doctor but if a doctor doesn’t render your illness ‘critical’, you won’t receive payment.
  • Some insurance providers limit the eligible age to under 70.
  • Critical illness and serious illness cover only protect against specified illnesses.
  • It’s a one-off payment. It won’t necessarily protect your income in the long run. For that you will need to look at income protection
  • The use of an appropriate trust structure so that death benefits sit outside of your estate and the probate regime, but critical illness benefits are paid out to policyholder.

Let Ascot Lloyd find the right life and critical illness policy for you

With so many policies out there, it’s difficult to know where to start and what would fit best in your financial plan. One of our financial advisers can help you navigate through all the options. We create personalised plans that ensure the right polices are in place to protect you and your loved ones. Additionally, an adviser can help you understand the terms and conditions of the policy, answer any questions you may have, and provide ongoing support throughout the financial planning process.

Access our life and critical illness protection advice today

Take the complexity out of finding the correct protection policy and contact our team of experts to discuss your life and critical illness protection options.

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Frequently asked questions

Do I need combined critical illness cover and income protection?

Income protection and critical illness insurance are both beneficial in their own right. Critical illness cover may only protect against certain ailments or events but the amount of cover is mainly limited by your budget, whereas income protection cover is specific to income loss caused by illness or accidents and the amount of cover will be limited by your earnings.

Does critical illness pay off my mortgage?

Under a critical illness insurance policy, you’ll receive a tax-free lump sum if you make a claim. Should you wish to use the lump sum to repay some or all of your mortgage, you can do so. However, we recommend talking to an adviser for guidance on your options and potential tax and benefits implications.

What if I can’t afford life and critical illness insurance?

If you can’t afford the level of cover you want or need, consider putting some cover in place that aligns to your budget or look at what else in your budget might be trimmed back such as underused subscriptions.