What Is Critical Illness Insurance?

Critical illness insurance is protection that pays a tax-free lump sum if you're diagnosed with a serious medical condition like cancer, heart attack, or stroke. Unlike life insurance which pays on death, critical illness pays while you're alive. Most policies cover 40-60 conditions. The payout can be used for anything: mortgage, treatment, living costs, or lifestyle changes.

What is the definition of critical illness insurance?

Critical illness insurance is a type of protection that pays a tax-free lump sum if you're diagnosed with a serious medical condition listed in your policy. Unlike life insurance, it pays while you're alive.

What qualifies as a critical illness?

Critical illnesses are serious medical conditions defined in your policy. Core conditions include cancer, heart attack, stroke, kidney failure, and major organ transplants. Most policies cover 40-60+ conditions.

How is critical illness different from life insurance?

Life insurance pays on death. Critical illness pays on diagnosis of a covered condition while you're alive. Some policies combine both, paying on whichever happens first.

Who defines what counts as a critical illness?

Each insurer defines conditions in their policy wording. The Association of British Insurers (ABI) provides model definitions for core conditions to help standardise coverage across providers.

Quick Answer

What Does Critical Illness Mean in Insurance?

Last reviewed: December 2025

Reviewed by Jay Sabine – CeMAP Qualified – 29 years experience

Critical illness insurance = tax-free lump sum if diagnosed with serious conditions like cancer, heart attack, stroke. Pays while you're alive (unlike life insurance). Most policies cover 40-60+ conditions.

Critical illness insurance is a type of protection policy that provides a one-off payment if you're diagnosed with a specified serious medical condition. The money is yours to use however you choose - many people use it to pay off their mortgage, fund treatment, or cover living costs during recovery.

Key Points

1Pays tax-free lump sum on diagnosis
2You must be alive to claim (unlike life insurance)
3Covers serious conditions: cancer, heart attack, stroke
4Most policies cover 40-60+ conditions
5Payout can be used for any purpose
6ABI provides standardised condition definitions

Eligibility Criteria

Diagnosis must meet policy definition
Condition must occur after policy starts
Survival period applies (usually 14 days)
Must be within policy term

Typical Timeframe

Claims are assessed against policy definitions. Payouts typically arrive 4-8 weeks after diagnosis confirmation.

Next Steps

1Understand what conditions matter to you
2Compare condition definitions between providers
3Calculate how much cover you need
4Get personalised quotes
5Speak to a protection adviser

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What Does Critical Illness Mean in Insurance?

Key Points

Eligibility Criteria

Typical Timeframe

Next Steps

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