In this article:

Does critical illness cover payout?

Yes, critical illness cover does payout, despite popular misconception that insurers try to avoid paying claims for these types of policies.

Figures for 2023 show that:

  • UK insurers paid out 90.5% of all critical illness claims[1]
  • £1.2 billion in claims were paid, which is a 13% rise from 2022

In this guide, we compare payout rates for some of the UK’s leading providers and answer your key questions on critical illness payouts.

For your free critical illness cover and life insurance quotes, simply fill in a few details about yourself using our online quote form.

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Which insurers have the best critical illness payout rates?

The table below shows critical illness payout rates for individual insurers over the past two years:

Critical illness provider

Rank

Claims paid 2022

Claims paid 2023

Legal & General

1

93.4%

93.0%

Scottish Widows

2

93.3%

92.0%

Guardian

3

N/A

92.0%

Aviva logo

4

93.5%

91.6%

Royal London

5

93.6%

90.5%

Zurich

6

90.0%

90.0%

Vitality

7

92.5%

87.8%

LV=

8

85.0%

85.0%

The information in this table has been taken from each providers website and is correct as of 29/08/24

As you can see, payout rates vary from year to year for each insurer. Most insurers have payout rates above 90%, suggesting that the likelihood of a critical illness claim being accepted is high.

Most insurers have payout rates above 90%, suggesting that the likelihood of a critical illness claim being accepted is high.

Please note, some insurers haven’t published their critical illness claims statistics, so we weren’t able to include these.

Reassured can compare life insurance with critical illness cover quotes for Legal & General, Aviva, Scottish Widows and LV=, free of charge.

What is a critical illness payout rate?

A critical illness payout rate refers to the percentage of critical illness claims that are paid out each year by an insurer.

Insurers have payout rates for each type of policy they sell, which may include critical illness cover, life insurance and income protection.

Pay out rates for protection policies in 2023

PolicyPayout rate
(% claims paid)		Total paid out
Critical illness cover91.6%£1.27 billion
Life insurance96.9%£3.90 billion
Income protection84.4%£77.85 million
Total permanent disability70.3%£24.06 million

Data provided by the Association of British Insurers (ABI)

Find out which insurers payout the most life insurance claims in our dedicated life insurance payout rates 2024 article »

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When does critical illness pay out?

Critical illness cover pays out if you’re diagnosed with a critical illness that’s covered by your policy and you survive a period of 10 or 14 days from diagnosis (depending on the insurer).

Examples of illnesses typically covered include:

It usually pays out within several days from when your claim is accepted, helping to replace any lost income and ease financial concerns during a difficult time.

Critical illness policies only provide cover for a specified term (up to 50 years), so you’ll only be able to claim and receive a payout during this period.

Why would critical illness not pay out?

A small number of critical illness claims are not paid out each year due to the following reasons:

  • Non-disclosure. This is when a policyholder hasn’t been fully honest during the application process. For example, if you fail to disclose a pre-existing health condition when applying for critical illness cover, this will invalidate your policy and could affect your payout.
  • The illness you’re claiming for isn’t covered by the policy. Insurers decline claims for conditions which don’t meet their specific definitions. Generally, an illness will need to progress to a specified severity before you can make a successful claim.
  • Missed payments. If you haven’t kept up to date with your monthly premiums, your policy will expire, and you won’t be able to submit a valid claim.

Most claims that aren’t paid are due to non-disclosure. Therefore, it’s essential that you provide accurate and truthful information when applying for cover.

How does a critical illness policy payout?

Critical illness cover pays out a tax-free lump sum upon a successful claim.

This will either be to the value of your full cover amount, or a percentage of your cover amount, depending on the illness that you’re claiming for.

Here we explain the types of payouts:

  1. Full payout - The majority of illnesses covered by a critical illness policy will provide you with a full payout upon a successful claim. An insurer will outline the list of conditions which are fully covered in your policy documents. If you make a successful claim for one of these specified critical illnesses, you’ll receive 100% of your cover amount. The policy will then come to an end.
  2. Partial payout - Most policies offer partial payouts for less severe illnesses (known as additional critical illnesses). For example, if you’re insured for £100,000 and your policy offers a 25% payout for an early-stage cancer, then you’d receive £25,000 for this condition. If you make a claim for an additional critical illness, your policy continues, and it won’t affect any payout in the future. Some policies also include cover for your children and will provide you with a partial payout if they’re diagnosed with one of the illnesses covered.

Before taking out a policy, it's important to understand what your policy covers and to know what to expect if you ever need to make a claim.

Reassured offer a fee-free broker service to help you compare critical illness cover and life insurance policies. Get in touch to speak to one of our dedicated experts.

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Calculate your critical illness cover payout

Use our handy calculator to work out your ideal critical illness payout amount. Simply fill in the costs you’d like your policy to cover.

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£129,130 is the average mortgage debt in the UK.

Life insurance with critical illness cover could help to keep your loved ones in the family home should you fall ill or pass away before paying off the mortgage.

Source: Finder.com
£
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£2,700 per month is the average UK household budget, life insurance with critical illness cover could help to replace your income and cover necessities such as bills and living expenses if you fell critically ill or passed away.

Source: Nimblefins.co.uk
£
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£2,277 is the average credit card debt per household in the UK.

Factoring in any debts into your sum assured could provide you with peace of mind that you could continue with payments if you were to fall ill, or that the debts could be settled after your passing.

Source: Themoneycharity.org.uk
£
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Should anything happen, you’ll want to ensure that necessary costs are protected for your children.

This could include childcare (on average £7,729 per year) or school associated costs (up to £1,756 per school year).

Sources: Daynurseries.co.uk & Theguardian.com
£
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If you were to fall critically ill, it’s likely you’d need to take a significant time off work in order to recover.

While you’d be entitled to sick pay and/or government support, this may not be sufficient to cover all your key costs.
£
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The price of private medical treatment can vary depending on the severity of the condition and the type of treatment required. It could be wise to add an additional sum to cover these costs.
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If you don’t claim on your policy for a critical illness and you pass away within the policy term, your loved ones could use the pay out to help cover the cost of your funeral.

The current average cost of a funeral in the UK is £4,141, with the overall cost of dying up to £9,658.

Source: SunLife.co.uk
£
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You could factor in an amount to leave to your loved ones to spend as they wish after your passing. Alternatively, you could make a cash gift to a charity of your choice.
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How much does critical illness cover payout?

In 2023, the average critical illness payout was £68,354[1].

However, exactly how much that’s paid out varies from person to person as everyone has different needs and circumstances.

When taking out a policy you can choose a suitable level of cover based on what you’d like to help protect should you fall unwell.

For example, a payout is commonly used to help cover:

  • Mortgage or rent payments (the average outstanding mortgage debt is £132,378[3] and the average rent is £1,223 per month[4])
  • Childcare costs (the average cost of childcare in the UK is £120.93 per week for a child entitled to 30 hours free[5])
  • Bills and family living costs (UK household spend on average £2,700 a month[6])
  • Private medical treatment or home adaptations to help with your recovery

Depending on your personal circumstances and budget, it’s possible to secure up to £1 million of life with critical illness cover through Reassured.

What illness has the highest payout rate?

Critical illness cover pays out more for cancer than any other critical illness.

In fact, cancer, heart attack and stroke account for the majority of critical illness claims[2].

For example, Aviva reported that in 2023:

  • Cancer made up 58% of all claims they received (74% of all female claims were for cancer)[7]
  • Heart attack made up 17% of all male claims (4% of female claims)
  • Stroke made up 11% of all male claims (4% of all female claims)

Aviva also reported that the most common cancer claims amongst men were prostate (30%), and for women, the most common claims were for breast cancer (55%).

How long does a critical illness claim take?

Unlike life insurance claims, critical illness claims require medical evidence from your doctor. Therefore, a claim can take slightly longer - usually around 8 weeks.

When diagnosed with a critical illness, you should contact your provider as soon as possible with any details of your condition and/or treatment.

They’ll check that your diagnosis meets their claims criteria and review the information you provided about your health when taking out the policy.

Some claims can take longer if there’s a delay with receiving your medical report, or if further information/investigation is required regarding your condition.

Once your claim has been assessed and accepted, payment will be made directly to your bank account within a few days.

Upon discussing your initial claim, your insurance provider will be able to provide you with a more accurate timescale of when the claim is likely to be paid.

Protect your home and lifestyle with critical illness cover [from £10 a month]

At Reassured, we offer life insurance combined with critical illness cover from a panel of leading UK insurance companies.

Our award-winning service helps you arrange affordable protection for your home, family and lifestyle should the unexpected happen.

Unfortunately, anyone can fall ill with a critical illness, therefore, it’s important to prepare for these events sooner rather than later.

Our dedicated team of experts are on hand to help you do this, free of charge and without obligation.

Simply fill in our online quote form with a few of your details and we’ll do the rest of the work for you.

Compare Critical Illness Cover » Find Our Best Rates

Critical illness payout FAQs:

What is the average critical illness payout?

In 2023, the average value of a critical illness lump sum pay out was £67,267.

19,876 people claimed against their critical illness cover and over £1.2 billion was paid out in total.

Is a critical illness payout taxable?

No, a critical illness payout isn’t taxable.

Any funds you receive from a critical illness policy are tax-free as it’s not considered an income.

Does critical illness payout affect benefits?

No, a critical illness payout won’t affect any state benefits you receive.

As mentioned above, the funds paid out from a policy are tax-free and aren’t counted as an income.

Does critical illness payout for terminal illness?

Yes and no. Some critical illness policies will payout for terminal illness.

However, critical illness cover is often taken out with life insurance, which does include terminal illness cover as standard.

Sources:

[1] https://www.abi.org.uk/news/news-articles/2024/9/protection-insurers-pay-out-record-7.34-billion-to-support-individuals-and-families/

[2] https://www.abi.org.uk/news/news-articles/2023/5/protection-insurers-pay-out-6.85-billion-to-support-individuals-and-families/

[3] https://www.finder.com/uk/mortgages/mortgage-statistics

[4] https://www.zoopla.co.uk/discover/property-news/average-rent-uk/

[5] https://daynurseries.co.uk/advice/childcare-costs-how-much-do-you-pay-in-the-uk

[6] https://www.nimblefins.co.uk/average-uk-household-budget

[7] https://www.aviva.com/newsroom/news-releases/2023/03/Aviva-pays-more-than-1bn-in-individual-protection-claims-for-the-third-consecutive-year/

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