A critical illness policy provides customers with an insurance policy that will pay out a tax free lump sum, should the customer be diagnosed with a critical illness and make it through the survival period.

The number of people who suffer from a critical illness in the UK is vast, and many of those people are unable to work as a result of their illness. A critical illness policy provides complete peace of mind that should the worst happen, the customer will be looked after financially.

How does a critical illness policy work?

When you take out a critical illness policy you take out a policy which will pay out a tax free lump sum should you be diagnosed with a critical illness and then make it through the survival period.

Each critical illness policy will have it’s own list of eligible illnesses and it’s own survival period. The survival period is the amount of time from first diagnosis of a critical illness that a customer must live to be eligible to make a critical illness policy claim, and is typically 28 days, although it may vary from insurer to insurer.

A critical illness policy will have a set term, which is usually the length of a mortgage, and covers for the customer for the term of the policy. The policy will cost more money on a monthly basis the older the customer is, and the more likely they are deemed to be to get a critical illness, based on their health and lifestyle choices.

A 45 year old who smokes and has done for ten years can expect to pay a lot more than a twenty five year old with no health worries and a good level of fitness. The number of critical illnesses covered will also vary from insurer to insurer, with one insurer currently covering over 160 different illnesses, although the majority only pay out a percentage of the total payout because of their reduced severity.

Where does a critical illness policy come from?

The critical illness policy was created by the worlds first heart transplant surgeon. Dr Barnard became frustrated that his customers were worrying about their financial struggles as a result of being unable to work, rather than concentrating on their recovery, and came up with the insurance to combat this problem.