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Do I need life insurance or critical illness insurance?

LifeSearch author Katie Crook-Davies
5 min read

by Katie Crook-Davies, Protection Writer

See author bio

Katie works with insurers and distributors to make protection propositions more accessible, pricing more transparent and marketing messages more simple.See author bio

Guide last reviewed 10 Oct 2023

If you’re considering buying some insurance and aren’t sure which product to choose, this guide is for you. Life insurance and critical illness insurance are two products that we think everyone should know about so here we explain what both products do and the steps you can take to work out which one you need.


What’s the difference between life insurance and critical illness insurance?

At a very basic level, both products essentially do the same thing, they provide a tax-free lump sum amount of money to protect you and your loved ones should the worst happen. The key difference between life insurance and critical illness insurance, however, is the stage at which a payout is made. A life insurance policy pays the benefit when you die, whereas a critical illness insurance policy will pay the benefit when you fall ill, providing that you have fallen ill with one of the critical conditions covered by the policy, which as standard will include cancer, heart attack and stroke.

For both products, you will need to choose how long you’d like to be protected for and how much cover you want.

Which type of insurance do I need?

Although these products are quite similar, they are designed to cover different things. Life insurance is handy if you have a family who are financially dependent on you; perhaps a partner or children. This is because the life insurance payout can be used to support them when you’re no longer around. Often people take out life insurance to cover their mortgage, providing peace of mind that any remaining debt will be paid off, should the worst happen. This helps to reduce the financial stress faced by the family at an already emotionally stressful time.

Life insurance can also be used to cover the costs of your funeral, or you may decide that the payout should go to a loved one as a gift.

Critical illness insurance, on the other hand, is a great product even if you have no financial dependants. The product pays out if you fall seriously ill, which in many cases may require you to take time off work for treatment and recovery. Depending on the financial support you would receive from your employer, you and your family may see a drop in income. Could you comfortably cover all of your outgoings in this situation? If the answer is no, then critical illness insurance might be the answer.

Critical illness insurance is a product that delivers financial freedom when you need it most. Freedom to take time off work while you recover, freedom to pay off your debts so your family doesn’t need to, and freedom to pay for private medical treatment. For this reason, critical illness insurance suits almost everyone who wants financial protection from illness.

It can sometimes be difficult to figure out whether life insurance or critical illness insurance would work better for you - because every individual’s situation is different. That’s where our specialist advisers can help. Our team can do a full assessment of your personal circumstances to work out exactly what type of insurance you need. For a friendly chat, please call us on 0800 316 7253.

Can I take out both life insurance and critical illness insurance?

You certainly can, in fact, most critical illness insurance policies are bought with life insurance. The two types of insurance form one product and will pay out your cover amount, either if you fall seriously ill, or if you die. It’s worth being aware that the policy will only make one payment and will then come to an end. So, if you fall ill and receive your full insurance benefit, you won’t then receive another payout when you die.

People sometimes choose to buy two separate policies, one life insurance and one critical illness insurance policy. This is a good way to get a bit more flexibility. For example, you may want a life insurance policy to cover your mortgage, should you pass away, but only want a small amount of critical illness insurance to supplement the family income for a number of months if you were to fall ill. Having two separate policies gives you and your family that additional layer of protection and peace of mind.

How do the costs compare?

Critical illness insurance is more expensive than life insurance. This is simply because you’re more likely to claim on a critical illness insurance policy than you are on a life insurance policy. In fact, did you know that a 35-year-old woman [1] is almost three times more likely to fall seriously ill, than she is to die before retirement?

But there are things that you can do to bring down the price of your critical illness insurance, like reducing the amount of cover you choose, or the length of time that you’re covered for. This can sometimes mean that it’s a good idea to have separate life and critical illness insurance policies, for the additional flexibility.

Beyond this, there are steps you can take to reduce the amount you’re charged, for either insurance product, including stopping smoking and improving your general health and lifestyle. Put simply, the healthier you are, the less likely you are to fall ill or die, and therefore the lower your insurance premiums will be.

Different insurers offer different life and critical illness insurance products and charge different prices, so it’s really important to do lots of research if you’re thinking about one of these policies.



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LifeSearch author Katie Crook-Davies
Katie Crook-Davies Protection Writer
Katie is an independent insurance consultant who is passionate about protection and wants to share that passion with others through engaging marketing content. She hopes that one day people will get as excited about protecting themselves and their loved ones, as she does!
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