3rd June 2025

5 Essential Considerations When Assessing Critical Illness Policies

When advising clients on selecting the ideal critical illness (CI) plan, several factors come into play - cost, quality, claims statistics, and administrative efficiency, among others. Ultimately, however, the true value of a plan is revealed at the point of claim.

1. Understanding Payment Conditions

100% Payment Conditions

Critical illness plans typically feature conditions that provide full payment of the sum insured, as well as additional payment conditions that offer a defined payment without reducing the original sum insured. While merely counting the conditions can be misleading, it is crucial that clients are protected against a broad spectrum of illnesses. Many insurers now offer a two-tiered approach: a comprehensive plan and a more budget-friendly version, catering to clients prioritising either coverage breadth or cost-effectiveness.

For example, in 2023, 85% of Royal London’s claims were related to just four conditions - cancer, heart attack, stroke, and multiple sclerosis - emphasising the importance of focusing on these key areas. Various wordings exist; one plan might exclude stage 1 thyroid cancer, whereas another might provide an immediate supplemental payment (e.g., LV= offering £1,000 upon a cancer claim notification) in addition to the claim amount. 

Consolidation of Conditions

The practice of counting critical illness conditions has become less meaningful due to insurers now grouping several previously distinct conditions under a single umbrella. Examples include conditions classified as “Parkinson Plus Syndromes” (which cover disorders such as progressive supranuclear palsy and multiple system atrophy), “Dementia” (often covering Alzheimer’s disease), and “Traumatic Brain Injury” (which now may include hypoxia and anoxia).

2. Additional Payment Conditions

Having been a feature for over two decades, additional payment conditions have evolved significantly. Insurers now often include upwards of fifty conditions where the additional payment is expressed as a percentage of the sum insured - typically capped at an agreed limit (for example, 50% of the sum insured or a maximum of £35,000).

Quality plans extend this further by covering a wider array of conditions such as Type 1 Diabetes and Crohn’s disease, along with less advanced forms of cancers. This added layer of protection is essential, as many consumers do not differentiate between early-stage cancer and more advanced diagnoses.

3. Value-Added Health Benefits

Modern CI plans often bundle valuable health benefits beyond the standard coverage. Features such as 24/7 GP access, second medical opinions, and annual health MOTs (as offered by providers like Aviva and HSBC) have gained prominence, particularly in the wake of the Covid-19 pandemic. Despite many clients being unaware of these additional benefits, those who are informed tend to view them as highly valuable.

4. NHS Waiting List Cover

An innovative feature that has emerged over the years is the inclusion of NHS waiting list cover. Originally designed to support major organ transplant claims for patients on the NHS waiting list, this benefit has expanded. For example, Vitality’s SIC3 plan now covers 20 conditions, while both Guardian and Royal London include waiting list cover on 14 conditions. Given the current challenges within the NHS, the option to use a claim payment for expedited private treatment is particularly attractive. Research from CIExpert’s Critical Thinking 2024 indicates that many claimants prefer to allocate these funds towards private healthcare rather than mortgage repayments.

5. Interpreting Claims Data

Relying solely on historical claims data to determine the “best plan” can be problematic. Changes in underwriting philosophies and the evolution of claim wordings over the years make it difficult to draw definitive conclusions. Nevertheless, it is important that clients are reassured by the robustness of claims performance.

Media reports often focus on declined claims, which can negatively impact consumer confidence. For instance, a few years ago, surveys suggested that consumers assumed only about 40% of claims were paid out. However, in 2023, 90.5% of all critical illness claims were honoured, with the majority of declinatures attributed to claims that did not strictly meet policy wording—often an issue with older plans. In contrast, HSBC has maintained a claims payout rate of over 94% for six consecutive years, underscoring the reliability of modern CI plans. 

 Alan Lakey, CI Expert

Protection