How Much Critical Illness Cover Do I Need?

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Ian Leyden

Ian is the Founder Director of Argyll Drummond

Critical illness cover

Life is unpredictable, and none of us can foresee the challenges that lie ahead. However, we can take steps to protect ourselves and our loved ones from the financial hardships that often accompany health crises. One such step is securing critical illness cover. But exactly how much cover is needed?

In this guide, we will walk you through the process of determining just how much critical illness cover you need. Whether you’re just beginning to explore critical illness cover or are looking to review your existing policy, we’ll help you assess your financial situation, understand the various types of policies available, and guide you in making an informed decision tailored to your unique circumstances.

Understanding Critical Illness Cover

Critical illness cover is a form of insurance that provides a payout in the event that you are diagnosed with a listed medical condition or illness during the policy term. This cover will pay a lump sum payment to the insured person, helping to ease the possible financial strain.

Types of illnesses covered:

Critical illness cover typically includes a list of medical conditions, such as cancer, heart attack, stroke, organ failure (e.g., kidney or liver), and major surgeries like coronary artery bypass. The illnesses covered may vary from one insurance provider to another, but they are generally life-threatening or will have a large impact on the insured person’s health and ability to work.

There are several key benefits to having critical illness cover:

  • Financial Protection: provides a safety net, offering a lump sum payment when you need it most. This can help cover medical expenses, ongoing treatment costs and other expenses during your illness, reducing the stress on your finances.
  • Peace of Mind: Knowing that you have financial support in case of a critical illness can provide peace of mind for you and your family, allowing you to focus on recovery without worrying about money.
  • Debt Repayment: The payout from critical illness cover can be used to repay debts, such as mortgages, loans, or credit cards, ensuring that your family’s obligations are met even if you cannot work.
  • Customisation: Critical illness policies can often be tailored to your specific needs, allowing you to choose the amount and type of cover that is required.
  • Tax Benefits: In the UK, the benefits received are typically tax-free.

Having critical illness cover can offer financial security and peace of mind during tough times, ensuring that you and your loved ones are better prepared to face the impact of a serious medical condition.

Your Current Financial Status

To make decisions about critical illness cover, it’s essential to take a close look at your current financial situation. This serves as the basis for deciding the right amount of cover and making sure that you are protected in times of adversity. Here’s why it’s crucial:

Assessing Your Financial Health

Looking at your finances provides a clear picture of your overall financial health. It allows you to understand where you stand regarding your assets, liabilities, income and expenses.

Factors to Consider:

When doing this check, it’s essential to consider key factors in order to make a decision about critical illness cover:

Income: Start by looking at your household’s main source of income. If you or your family depend on your earnings for daily expenses, critical illness cover becomes even more vital. In case of a serious illness that limits your ability to work, the payout could replace lost income.

Expenses: Take a good look at your monthly and annual expenses. This should include mortgage or rent payments, bills, groceries, insurance premiums, travel costs and other spending. Consider how these expenses might change if you were unable to work due to a critical illness.

Debts: Evaluate your debts, such as loans, credit card balances and other obligations. Critical illness insurance can be a lifeline in repaying these debts if your income is disrupted by illness, preventing financial strain on your family.

Savings: Examine your current savings. Decide whether you have enough saved to cover your living costs if you were unable to work for a period due to illness. Critical illness cover can act as a cushion if your savings are low.

How Critical Illness Cover Provides Stability

Critical illness cover plays a key role in keeping finances stable during a health crisis. Here’s how:

Protection: Critical illness cover provides a lump sum payout upon diagnosis of a covered condition. This sum can be used to cover medical expenses, treatment costs, and daily living expenses while you focus on your recovery.

Replacing Lost Income: If your illness stops you from working, the payout can replace lost income, making sure that your family’s needs are met during your recovery period.

Reducing Debts: The funds received from critical illness cover can be used to pay off debts, such as your mortgage or loans, reducing stress and allowing you to pay your financial commitments.

By looking at factors like income, expenses, debts and savings, you can decide the right level of cover needed to provide stability in the face of health challenges.

Deciding Your Cover Needs

Calculating the right amount of critical illness cover involves several steps. Calculate your current and expected future expenses, such as mortgage payments, education costs and potential medical bills.

  • Assess your existing insurance cover to avoid overlaps or gaps.
  • Consider your family’s financial needs to ensure their security.
  • Account for factors like inflation and potential investment returns, which may affect your cover over time.

The expertise of an insurance broker can be invaluable in this process.

Types of Critical Illness Cover

Critical illness cover comes in different forms, each with its own set of pluses and minuses. Understanding the various types of policies is essential for making a choice that fits with your circumstances.

1. Lump Sum Payment Policies


Immediate Financial Relief: Lump sum policies offer a one-time payment upon the diagnosis of a covered illness. This payout can be used to cover medical bills, debts, or any other financial needs.

Flexibility: The policyholder has the flexibility to use the lump sum as they see fit, whether it’s for medical treatments, home changes, or supporting their family during recovery.


Risk of Mismanagement: The temptation to spend the entire lump sum quickly can pose a risk. Careful financial planning is crucial to ensure the funds last as long as needed.

Tax Implications: Depending on your location, the lump sum payment may have tax implications. Consult with a tax advisor to understand the tax treatment.

2. Regular Income Policies


Financial Support: Regular income policies provide an income during the illness. This ensures a stable financial situation, especially if you are unable to work.

Budgeting: Known monthly or annual payments make it easier to budget for ongoing expenses and maintain your lifestyle.


Limited Flexibility: Unlike lump sum payments, regular income policies may not offer the same level of flexibility in using the funds.

Cost: These policies may be slightly more expensive due to the payment duration.

Selecting the Most Suitable Policy

Choosing the right type of critical illness cover depends on your circumstances and preferences. Here’s some guidance to help you decide:

Consider Your Financial Goals: Look at your objectives, such as paying off debts, maintaining your family’s lifestyle, or covering medical expenses. This will influence whether a lump sum or regular income policy fits better with your goals.

Assess Your Risk Tolerance: Your comfort with handling a lump sum versus receiving regular payments should also factor into your decision. Consider which approach you think is better during a critical illness.

Review Your Existing Cover: If you have other insurance in place, assess how it fits with your critical illness cover needs. Ensure there are no gaps in your overall insurance cover.

Consult an Advisor: Seeking guidance from a financial advisor or insurance expert can provide valuable insight. They can help you analyse your situation and recommend the policy type that best suits your needs.

Ultimately, the choice between lump sum and regular income critical illness cover should be based on your individual situation and long-term goals. Careful consideration and professional advice can help you make a well-informed decision that provides the security you need in case of a critical illness.


In a world which is uncertain, critical illness cover stands as a shield against the unexpected.

Selecting the right type of cover, whether it’s a lump sum payout for immediate financial relief or a regular income policy for steady support, depends on your circumstances and financial goals.

Seeking guidance from a professional advisor can help you with this decision, ensuring that your choice matches your specific needs.

Contact our experienced insurance experts today for guidance and a quote tailored to your needs. Your peace of mind starts with the right cover.

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