Critical Illness Cover For Business Owners

Financial peace of mind if you suffer a serious injury, illness or disability.

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Graham Cox - Founder & Cemap Mortgage Advisor |
Graham Cox
CeMAP Mortgage & CPSP Specialist Finance Advisor

If you ever have a major health scare or emergency, the last thing you want is to be worrying about money.

Critical illness cover (CIC) allows you to focus on your recovery, without the additional burden of wondering how to pay the mortgage or bills.

This guide explains what Critical Illness Cover is, the types of illnesses and conditions covered, and how to assess the benefit level you need.

We also discuss how CIC can be purchased with Life Insurance and the key differences between CIC and Income Protection.

What is Critical Illness Cover?

Critical Illness Cover is a type of insurance policy that provides a single tax-free payout if you suffer a serious illness or injury.  

It's a vital financial safety net for you and your family if you suffer a critical illness during the term of the policy.

How soon can I claim after a critical illness?

The benefit amount can be claimed as soon as you're officially diagnosed with a critical illness, injury, or disability as defined in the insurer's policy document.

What you do with the payout is entirely up to you. It could be used to renovate your home to accommodate a disability or simply to pay the mortgage and bills.

But there's nothing to stop you from saving it, particularly if you make a speedy recovery.

Standalone or with Life Insurance

Critical Illness Cover can be a standalone policy or taken out alongside Life Insurance as a multi-benefit policy.

However, the level of Critical Illness Cover doesn't need to match the Life Insurance benefit amount.

For example, you may decide you need £300000 of life cover, but only £100000 CIC. And although the two policies are with the same insurer, you can still claim on both.

It's also possible to take out a combined policy that pays out on the first event only, critical illness or death (or a terminal illness diagnosis).

What illnesses and injuries are covered by CIC?

Each insurer specifies the serious illnesses, conditions, and disabilities they cover. Some of the most common are:

  • Heart Attack
  • Stroke
  • Cancer, excluding early stage or non-invasive cancers. Sadly,  1 in 2 people will develop some form of cancer in their lifetime.
  • Loss of a limb such as an arm or leg
  • Parkinson's Disease
  • Traumatic head injury
  • Organ transplant
  • Multiple Sclerosis
  • Alzheimer's disease
  • Total & permanent disability (either included as standard or as an optional extra)

It's also possible to include your children on the policy, though some insurers reduce the payout level for a child claim. Nevertheless, it can still be an invaluable additional benefit. Especially if you need weeks or months away from your business to focus on supporting your child's recovery.

How does the application process work?

In most cases, the application process for a CIC policy is straightforward, and simply involves answering some medical and lifestyle questions during the online application. Typically it takes around 30-40 minutes and your adviser will take you through it.

Depending on your answers, the insurer, with your permission, may request a GP report or seek further information about your medical history. But usually that isn't necessary.

What level of Critical Illness Cover do I need?

The amount of Critical Illness Coverage required depends on your circumstances and budget.

It's worth considering how long could you and your family could survive financially if a serious illness or injury meant you were unable to work in your business for an extended period.

Would your business be able to run without you? How would profits be affected? And could you or your spouse/partner still draw a salary or take dividends to cover the mortgage and bills?

Knowing the answers to those questions will go a long way to working out how much cover you need.

What's the difference between Critical Illness Cover & Income Protection?

Critical Illness Cover differs from Income Protection (IP) in several ways:

First, as the name suggests, CIC only pays out if you experience a critical illness as defined by the insurer's policy document.

Income Protection pays out on a far broader range of illnesses and conditions, including back or musculoskeletal pain and mental health issues.

CIC pays out one-time only

CIC pays out a one-time tax-free lump sum and you can only claim once.

After the wait or deferment period, Income Protection pays out every month you're off work from your chosen occupation due to illness or injury.

Unlike CIC, IP also allows unlimited claims, either for a reoccurring condition (such as cancer or back problems), or for a brand new illness or injury that prevents you from working.

Do I need to be unable to work to claim on critical illness?

Critical Illness Cover doesn't require you to be unable to work in order to claim. Income Protection does.

Finally, a Critical Illness claim can be made as soon as the policyholder is diagnosed or suffers a critical injury/disability.

With Income Protection, the policyholder needs to reach the end of the deferment or wait period before receiving the monthly benefit.

How to get a critical illness insurance quote

Regardless of whether you have a mortgage or not, critical illness insurance provides a financial lifeline should you become seriously ill or injured.

Getting a plan in place now gives you and your family the comfort of knowing you have money to fall back on whilst recovering.

SEMH have access to a huge range of critical illness providers, including mainstream and niche insurers. So we can often help even when you have an unusual or complex medical history.

To speak to an SEMH adviser and get a no-obligation quote, call 0117 205 0655 during our office hours of 9am to 5pm Monday to Friday. Or enter your details here for a call back. There's no-obligation and we'll be happy to answer any questions you have.

Graham Cox - MLIBF CeMAP Mortgage Adviser & Director of Hub FS Ltd

About the author

Graham Cox is the founder of Self Employed Mortgage Hub, the trading name of Hub FS Limited.

Based just north of Bristol, SEMH is an independent, whole of market broker and a true specialist in self employed mortgages, helping business owners across the UK get great mortgage and protection deals.

Graham's market commentary and analyis is regularly quoted in the national press and media, including The Guardian, Telegraph, FT Adviser, and BBC Radio Bristol.