Critical Illness Insurance Guide 2026 | UK Costs
Critical illness insurance is a long-term insurance policy designed to act as a financial safety net if you are diagnosed with a severe medical condition. Unlike life insurance, which pays out upon death, critical illness cover pays a tax-free lump sum upon diagnosis of a specified illness defined within your policy terms.
In 2026, the cost of living and medical expenses continue to rise, making financial resilience more important than ever. A serious illness can force you out of work for months or even years, leading to a loss of income just when you need it most. The payout from a policy can be used for anything: paying off a mortgage, modifying your home for disability access, covering private medical bills, or simply replacing lost income.
How Much Does it Cost in the UK?
The cost of critical illness insurance varies significantly based on risk. Insurers assess the likelihood of you making a claim during the policy term. The average cost for a typical policy ranges between £20 and £80 per month, but this is highly dependent on your personal profile.
Key Cost Factors
- Age: Prices increase as you get older. A policy taken out at age 30 is significantly cheaper than one taken out at age 50.
- Smoker Status: Smokers are at higher risk for many critical illnesses (cancer, heart disease). Consequently, premiums for smokers are often 50-100% higher.
- Health History: Your BMI, family medical history, and pre-existing conditions play a huge role. If your parents suffered heart attacks before age 60, your premiums may rise.
- Term Length: The longer the policy runs, the higher the risk of illness, and thus the higher the cost.
- Amount of Cover: The sum assured is directly proportional to the premium.
Cost Examples (2026 Rates)
Based on a policy covering a lump sum of £200,000 over a 20-year term:
| Age | Non-Smoker (Monthly) | Smoker (Monthly) |
|---|---|---|
| 30 | £15 - £25 | £30 - £45 |
| 40 | £30 - £50 | £60 - £90 |
| 50 | £75 - £110 | £150 - £220 |
*Note: Figures are indicative averages for a person in good health. Actual quotes will vary.
Standalone vs. Combined Coverage
When purchasing cover, you have two main structures to choose from:
1. Combined Life and Critical Illness
This is the most popular option. It covers you for both death and serious illness. However, it typically pays out only once. If you are diagnosed with cancer and receive the critical illness payout, the policy ends. There is no further life insurance payout when you eventually die. This is often cheaper than buying two separate policies.
2. Standalone Critical Illness
This policy is independent of your life insurance. If you claim for a critical illness, your separate life insurance policy remains active (provided you continue paying premiums for it). This ensures that you still have a death benefit for your family after surviving a serious illness.
3. Mortgage Protection (Decreasing Term)
Many homeowners link their insurance to their mortgage. As your mortgage balance decreases over time, the potential payout from the insurance decreases ("decreasing term"). This is the most affordable way to ensure your home is paid off if you fall ill, though it leaves no surplus cash for living expenses.
Exclusions and Limitations
Understanding what is not covered is as important as understanding what is. Common exclusions include:
- Pre-existing Conditions: Illnesses you had before taking out the policy are almost always excluded.
- Survival Period: Most policies require you to survive for a minimum period (usually 10-14 days) after diagnosis to claim. If you pass away immediately during a heart attack, the critical illness policy would not pay out (though a life insurance element would).
- Lifestyle Exclusions: Injuries resulting from drug abuse, self-harm, or hazardous hobbies (like skydiving) without prior declaration may invalidate a claim.
Children's Cover
Many premium critical illness policies in the UK now include children's cover as standard or as a low-cost add-on. This typically pays out a smaller lump sum (e.g., £25,000 or 25% of the main sum assured) if your child is diagnosed with a specific condition. This money can be invaluable for allowing parents to take unpaid leave to care for a sick child.
Frequently Asked Questions
- Is critical illness insurance worth the cost?
- For many UK residents, critical illness insurance is a vital safety net. With one in two people born after 1960 expected to be diagnosed with some form of cancer in their lifetime, having a tax-free lump sum can cover mortgage payments, private medical treatment, or lifestyle adjustments when you are unable to work.
- Does critical illness insurance pay out on death?
- Typically, a standalone critical illness policy only pays out upon diagnosis of a specified illness, not death. However, many people purchase 'Life and Critical Illness' cover, which pays out on whichever event happens first, ensuring your family is protected in both scenarios.
- Can I get critical illness cover if I smoke?
- Yes, but premiums will be higher. Smokers can expect to pay approximately 50% to 100% more than non-smokers for the same level of cover due to the higher risk of developing conditions like heart disease, stroke, and certain cancers.
- Is the payout taxable?
- No. Under current UK tax law, the lump sum payout from a critical illness insurance policy is free from Income Tax and Capital Gains Tax.
- What conditions are always covered?
- To be sold as a critical illness policy in the UK, insurers must cover at least Cancer (excluding less advanced cases), Heart Attack, and Stroke. These three conditions account for the vast majority of claims.
- Does this cover me for Coronavirus (COVID-19)?
- Critical illness policies list specific conditions. COVID-19 itself is rarely a named condition. However, if complications from the virus lead to a named condition—such as a stroke, heart attack, or organ failure requiring a transplant—you may be able to claim.
- Can I cancel my policy at any time?
- Yes, you can cancel your policy at any time. However, these policies do not have a cash-in value, so you will not receive any money back for premiums already paid.