Serious illness insurance

Why this cover matters right now

Serious illness insurance pays a tax-free lump sum if you are diagnosed with a listed condition such as cancer, a heart attack, or a stroke. The money can help with your mortgage, everyday bills, treatment costs, or adapting your home while you focus on recovery. It is not about fear - it is about protecting your finances when health events disrupt income and increase expenses.

Across the UK, claims and payouts are rising. Total critical illness payouts reached around £1.3 billion in 2024, with average lump sums in the region of £67,600. Cancer drives the majority of claims, and the number of people living with cancer is now approaching 3.5 million. Younger adults are also claiming more, with around one in five claims coming from under-40s. At the same time, only a small share of adults hold this cover, which leaves many households exposed if illness stops work.

Most policies pay out once on diagnosis, provided your condition meets the policy definition and you disclosed your medical history accurately when you applied. UK insurers have high payment rates - the vast majority of valid claims are paid - but non-disclosure and not meeting definitions are common reasons for declines. This guide sets out the essentials in plain English so you can check whether this protection fits your situation and budget.

The goal is financial stability during treatment and recovery - not overbuying cover you do not need.

What is covered and how claims generally work

Policies list the conditions they cover. Leading UK plans typically include cancer, heart attack, stroke, total permanent disability, and a wide range of neurological and organ-related conditions. Some policies cover between 36 and 74 illnesses, with optional partial payments for less severe diagnoses. If a listed condition is diagnosed and meets the policy definition, the insurer pays the lump sum to you directly, tax free in the UK.

Coverage is not unlimited. Early-stage cancers and milder cardiac events may not qualify unless the policy has specific partial benefits. Pre-existing conditions are usually excluded, and insurers rely on your full medical disclosure at application. If information is missing or inaccurate, claims can be rejected. Most policies pay out once and then end, though some allow multiple partial payments for different conditions.

Here is how it might work in practice. You are diagnosed with a specified cancer that meets the policy definition. You submit medical evidence from your consultant. The insurer assesses the claim and, if valid, pays the agreed lump sum. You choose how to use the funds - clear debt, cover rent or mortgage payments, pay for travel during treatment, or bridge lost income if your sick pay is limited. If your diagnosis does not meet the policy definition, no payment is made, so understanding definitions upfront is essential.

Who benefits most - and who might not need it

This cover can suit people who rely on their income to meet regular commitments such as a mortgage, rent, childcare, or loan payments. It can be valuable for families with one main earner, self-employed professionals without generous sick pay, and younger households who may underestimate illness risk but face long financial obligations ahead. It can also help those who want the flexibility to fund private treatment or take time away from work to recover.

It may be less essential if you have substantial accessible savings, comprehensive employer benefits, or existing protection that would cover your outgoings. Some may prefer income protection to replace monthly earnings rather than a lump sum. If you have significant health issues already, availability and cost may be challenging, and specialist advice could be helpful.

Choosing your cover level and useful add-ons

1. Basic - Core conditions only

   • Covers a focused list of major illnesses such as cancer, heart attack, and stroke.
   • Lower monthly cost with straightforward definitions, usually a single full payout.
   • Suitable if you want essential protection to cover key bills.

2. Standard - Wider condition list

   • Adds more neurological, organ, and disability conditions, often 36-50 illnesses.
   • May include partial payments for earlier-stage diagnoses or specific procedures.
   • Good balance of breadth and affordability for most households.

3. Enhanced - Comprehensive protection

   • Broadest lists, sometimes 60-74 illnesses, plus children’s cover options.
   • Higher cover limits, flexible benefit options, and multiple partial payouts.
   • Best for those with larger commitments or who want more definitions covered.

4. Add optional features

   • Children’s cover - Pays a lump sum if a child is diagnosed with a listed illness.
   • Total permanent disability - Included on many plans, sometimes optional or tiered.
   • Waiver of premium - Keeps your policy in force if you cannot work due to illness.
   • Increasing cover - Index-links the sum insured to help offset inflation.
   • Joint life options - One payout on first claim for couples with shared commitments.

Pick a sum assured that realistically covers debts and 1-3 years of core expenses.

What it costs and what drives the premium

Typical premiums vary by age, health, cover amount, and features. Prices are not guaranteed and differ by insurer. The table shows common influences and general trends.

Prices are generally lowest for younger non-smokers choosing modest sums insured over shorter terms. Adding children’s cover, higher sums, or enhanced definitions will increase cost. Review premiums at renewal or if you change your policy settings so the price stays manageable.

Can you apply - and what insurers look for

Most UK insurers accept applications from around ages 16 to 69, with maximum cover limits that can reach into the low millions. You will complete a health and lifestyle questionnaire, and you may be asked for a medical report from your GP or to attend a nurse screening depending on the amount of cover and your history. Full and honest disclosure is essential - non-disclosure can invalidate a future claim.

Typical reasons for refusal or special terms include significant pre-existing conditions, recent or ongoing investigations, high-risk occupations, or hazardous hobbies. Smokers and those with higher BMI may receive higher premiums or exclusions. If cover is offered with exclusions or a premium loading, check that the policy still meets your core needs before proceeding.

From quote to claim - simple steps

1. Gather your numbers - mortgage, debts, and essential monthly expenses.
2. Get quotes online to compare sums insured, terms, and key definitions.
3. Read policy summaries - focus on covered illnesses and exclusions.
4. Complete the application truthfully - include GP details and full history.
5. Undergo any medical checks requested to confirm your information.
6. Receive your policy documents and cooling-off details - store them safely.
7. If diagnosed, contact the insurer early and submit medical evidence promptly.

Weighing it up - advantages and trade-offs

Match the policy to your biggest financial risks - not to the longest feature list.

Key checks before you commit

Confirm exactly which illnesses are covered and how each is defined, especially for cancer and cardiac conditions. Check whether the policy pays partial benefits for earlier-stage diagnoses and if a full claim ends the policy. Understand any waiting periods, exclusions, and limitations related to pre-existing conditions. Review the sum insured, term length, index-linking, and whether waiver of premium or children’s cover is included. Note the cooling-off period, how to update details, and how premiums may change if you alter your cover. Keep all documents and your GP details accessible so any future claim is straightforward.

Alternatives and related protection

1. Income protection insurance - Replaces a portion of your salary monthly if illness or injury stops you working. Suitable if you need regular income rather than a lump sum.
2. Life insurance - Pays out on death, sometimes with terminal illness benefit. Important for family protection but does not pay for non-terminal serious illness.
3. Family income benefit - Provides fixed monthly payments to dependants after death. Useful for budgeting needs.
4. Accident and sickness cover - Short-term policies with simpler underwriting. Can suit temporary needs but with lower benefits and shorter terms.

Frequently asked questions

Q: Is the payout taxed in the UK? A: Critical or serious illness lump sums are usually paid tax free. Any interest earned after you receive the money may be taxable. Check how using the funds could affect means-tested benefits.

Q: How is this different from income protection? A: Serious illness cover pays a one-off lump sum on diagnosis of specified conditions. Income protection pays a monthly benefit if you cannot work due to illness or injury. Some people hold both for broader protection.

Q: Are pre-existing conditions covered? A: Generally no. Insurers assess your medical history at application and may exclude conditions or decline cover. Full disclosure is essential to avoid problems at claim time.

Q: Can I change my cover later? A: Many policies allow changes such as increasing cover after life events or index-linking at renewal. Any change may require new underwriting and could affect price and terms.

Q: What are common reasons claims are declined? A: Non-disclosure of medical history, diagnoses that do not meet policy definitions, and conditions excluded at outset. Keep records, read definitions carefully, and submit complete medical evidence.

Q: Do insurers really pay most claims? A: Yes. UK insurers pay the vast majority of valid serious illness claims each year, reflecting strong reliability. The key is meeting definitions and having accurate disclosures.

What to do next

Take a few minutes to list your essential outgoings and any savings you could rely on. Use that to set a realistic lump sum and term. Compare policies from several insurers, focusing on definitions, exclusions, and affordability over the whole term. If unsure, consider regulated advice. You stay in control throughout - choose only the cover that fits your needs and budget.

Important information

This guide provides general information only and is not personal financial advice. Policy terms, definitions, and prices vary by insurer. Always read the full documents, disclose your medical history accurately, and confirm details before buying.