How much critical illness cover do you really need?

The amount of critical illness cover you require will depend on your personal circumstances and the financial impact you becoming critically ill would have on you and your family.

Using our critical illness calculator (below) will help you to determine how much critical illness cover you require.

How much critical illness cover do I need calculator.

Enter your financial commitments to understand the level of cover you require.

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£137,934 is the estimated mortgage debt per household in the UK.

The purchase of a home is likely to be the largest financial commitment any of us will make in our lifetime. Your life insurance should cover your remaining mortgage balance to allow your loved ones to stay in the family home should anything happen to you.

Source: Moneynerd.co.uk

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The average monthly household budget in the UK is £2,548 (that’s £30,576 per year), which is spent on transport, food & drink, utilities (gas, electricity, water etc), clothing, council tax and leisure activities.

With energy prices hitting a record high and the cost of living rising sharply in the UK, you may wish to factor in utility bills and family living expenses into your cover.

Source: Nimblefins.co.uk

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The average personal debt of UK adults has risen to £34,566 (not including mortgage debt), with credit cards, personal loans and overdrafts being the most common forms of debt.

Factoring in any debts into your life insurance cover means that, if they need to be paid back from your estate after your passing, your loved ones won’t miss out financially.

Source: Money.co.uk

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According to SunLife, the average cost of a funeral in the UK is £3,953 (with the overall cost of dying at £9,200).

Funeral costs have increased by 116% since 2004 and are a significant cost which should be factored into the amount of life insurance you secure.

Source: SunLife.co.uk

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When factoring in cover for your children, you may wish to calculate the amount based on how long it is until they reach financial independence.

This could include childcare (£7,000 per year for part-time care), school expenses (£1,519 per school year for uniforms, lunches, stationary etc), as well as an additional sum for further education (this could be a contribution of up to £5,000 per year).

Sources: Daynurseries.co.uk, Primarytimes.co.uk & Savethestudent.org

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2 in 5 adults say they are relying on an inheritance to fund their retirement.

Factoring in an inheritance to your sum assured could allow loved ones to live a more financially comfortable life. Alternatively, you could leave a cash gift to a charity of your choosing.

Source: Moneyage.co.uk

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If you’re lucky enough to have your own savings or are part of the 30% of UK residents who already have a life insurance policy in place, this can provide financial protection for loved ones.

By entering your current cover, savings or death in service amount you can reduce the sum assured you require.

Source: Scottishbusinessnews.net

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Your total cover estimate

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At Reassured, our award-winning and FCA-regulated service can be used to compare quotes to help you secure the right cover to meet your needs.

Simply get in touch today.

Keep reading to fully understand how much critical illness cover you require…

Is it worth taking out critical illness cover?

Statistics show that you're far more likely to fall critically ill during your working life than pass away.

Critical illness cover can help protect the financial wellbeing of you and your loved ones if you were to fall critically ill and became unable to work.

With such cover in place, a lump sum pay out will be made upon diagnosis of a life-changing illness such as cancer, a stroke or blindness.

These funds could be used to help with the following:

  • Replace a lost income
  • Fund necessary adaptations to your home
  • Pay for private medical treatment
  • Get your family finances in order
  • Take your family away on holiday

Therefore, whether or not critical illness is worth taking out will depend on your personal circumstances and the impact being diagnosed with such illness would have on your financial wellbeing.

It's likely anyone bringing income into a household would benefit from having some critical illness cover in place.

Why would you need critical illness cover?

As mentioned, a critical illness cover claim could be used to help cover the cost of private health care, necessary home adaptations or just to enjoy with your family.

Without critical illness cover, being unable to work could result in:

  • Not being able to pay for the mortgage
  • Not being able to meet family living costs
  • You family being required to find the funds for changes to your home and lifestyle

Taking out adequate critical illness cover could help to ensure that these needs are met.

How much life insurance and critical illness cover do I need?

Whilst it's possible to arrange critical illness cover without life insurance from certain providers, more commonly the products are sold as a combined policy.

Therefore, to determine how much life insurance and critical illness cover you require, you should consider not only the financial impact of you no longer being able to work, but also your passing.

Therefore, when arranging a combined life insurance and critical illness policy, you should also factor in expenses such as funeral costs and an inheritance (should you wish to leave one).

According to SunLife, the average cost of dying is £9,200 with the average cost of a basic funeral being £3,953[1].

Therefore, a combined life insurance and critical illness policy is likely to require a much higher cover amount (or sum assured).

Arranging combined life insurance and critical illness cover may be cheaper on a monthly basis as it only requires paying one premium, but it will also only result in one pay out.

Therefore, if you're diagnosed with a life-changing illness and make a claim, your life insurance will also expire.

Can I have multiple critical illness policies?

Yes. As with life insurance, it's possible to have multiple critical illness policies in place at once.

Therefore, if diagnosed with a life-changing illness, you can make a claim on all policies in place to increase the overall pay out.

This may be beneficial in a number of scenarios:

  1. If you have a combined life insurance/critical illness policy and standalone policy in place and are diagnosed with a life-changing illness you may not need the full sum assured from both policies. Therefore, you can make a claim on the critical illness policy and leave the other policy in place to protect your life insurance
  2. If you already have one critical illness policy in place but require additional cover due to a change in personal circumstances (e.g. more children, larger mortgage or a significant increase in income) you may wish to take out another critical illness policy to close the cover gap – Although in this instance it is important to compare quotes for brand new cover, as it may be cheaper to start new cover with a larger sum assured
  3. If you have two critical illness policies in place and are diagnosed with a life-changing illness, you may only wish to claim on one policy, leaving the other intact should you be diagnosed with a different critical illness in the future (this is at the discretion of the policyholder)

Compare quotes to secure the best deal

The cost of critical illness cover (with or without life insurance) varies significantly between insurance providers.

Therefore, it's essential to compare quotes to see if you can save money on your premiums.

At Reassured, we can compare combined life insurance and critical illness cover from our panel of insurers to help you find the best price we have available.

Simply get in touch with our award-winning team today for your free quotes.

Sources:

[1] https://www.sunlife.co.uk/funeral-costs/

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