How Does Critical Illness Insurance Work?

Critical illness insurance pays a tax-free lump sum if you're diagnosed with a serious condition covered by your policy. You choose your cover amount and pay monthly premiums. If diagnosed with a listed condition (like cancer, heart attack, or stroke) that meets the policy definition, you receive the payout. Most policies pay once, then end. The money can be used for anything: mortgage, treatment, or living costs.

How does critical illness insurance work?

You pay monthly premiums for a set term. If you're diagnosed with a covered condition that meets the policy definition, you receive a tax-free lump sum. The policy then ends (most policies pay once only).

When does critical illness insurance pay out?

It pays when you're diagnosed with a covered condition that meets the policy's specific definition. There's usually a 14-day survival period. Claims typically take 4-8 weeks to process.

What conditions does critical illness cover?

Most policies cover 40-60+ conditions. Core conditions include cancer, heart attack, stroke, kidney failure, and major organ transplants. Cancer accounts for around 65% of all claims.

Is the payout tax-free?

Yes, critical illness payouts are completely tax-free in the UK. You receive the full sum with no deductions for income tax or capital gains tax.

Quick Answer

What Is Critical Illness Insurance?

Last reviewed: December 2025

Reviewed by Jay Sabine – CeMAP Qualified – 29 years experience

Critical illness insurance pays a tax-free lump sum if diagnosed with serious conditions like cancer, heart attack, or stroke. Covers 40-60+ conditions. 92% of claims paid. Average payout £67,000.

Critical illness insurance provides financial protection if you're diagnosed with a serious health condition. Unlike life insurance which pays on death, critical illness pays while you're alive, giving you money when you need it most for treatment, mortgage payments, or lifestyle changes.

Key Points

1Tax-free lump sum on diagnosis
2Covers 40-60+ serious conditions
3Cancer = 65% of claims
492% of claims paid successfully
5Average payout £67,000
6Use the money however you choose

Eligibility Criteria

Diagnosis must meet policy definition
Condition occurs after policy starts
14-day survival period typically applies
Pre-existing conditions excluded

Typical Timeframe

Claims typically paid within 4-8 weeks of diagnosis and submission of medical evidence.

Next Steps

1Calculate how much cover you need
2Compare UK providers
3Check conditions and definitions
4Get personalised quotes
5Speak to a protection adviser

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Critical Illness Insurance: Key Facts

What Is Critical Illness Insurance?

Key Points

Eligibility Criteria

Typical Timeframe

Next Steps

Related Questions

How Critical Illness Insurance Works

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