Critical Illness Insurance
Protection for you and your family if you’re unable to work
Achieve peace of mind by ensuring you can cover your costs in the event of serious illness.
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A one-off, tax-free payment to replace lost earnings.
A serious illness or injury that prevents you from working is bad enough. The last thing you need is to worry about how you’ll support yourself or your family during an already difficult time. Critical Illness cover can’t stop you from getting ill, but it can help soften the financial blow.
With Critical Illness Insurance, you can overcome the burden of being unable to work through a one-off lump sum payment designed to protect your way of life. It can be used to pay off debts, cover the cost of treatment, or ensure you can continue to provide for your family.
Our experts will guide you through the different policies available and make sure you find the cover that works best for you and your lifestyle.
The One-Off Payment
Most critical illness cover policies only pay out once (with some exceptions). It’s vital to think about everything that needs to be covered — for instance, paying off your mortgage or debts, modifying your house for accessibility, or ensuring your loved ones have enough money for the future. We can help you work this out.
Tax Information
Typically, premiums aren’t tax deductible and must be paid out of post-tax income or may be considered a benefit. However, any benefit received is tax-free.
All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs’ practice. Levels and bases of tax relief are subject to change.
Speak to an expertWhy Contractors Specifically Need Critical Illness Cover
For contractors, both inside and outside of IR35, your ability to earn an income depends directly on your health. Unlike employees, you don’t have the luxury of sick pay or long-term support. Here’s why critical illness cover is essential:
1. No Sick Pay Safety Net
Contractors typically don’t receive Statutory Sick Pay or employer sick benefits. If you're diagnosed with a serious illness—such as cancer, a heart attack, or stroke—you could be without any income for months or even years.
In 2024, the average critical illness payout in the UK was £70,898, helping individuals bridge income gaps and manage treatment costs. Without protection, over 65% of self-employed workers say they could only survive for three months without income (ONS 2024).
2. Maintain Lifestyle and Cash Flow
Even if you can’t work, your expenses don’t stop. Rent or mortgage, utilities, groceries, and childcare all continue. A tax-free lump sum of £50,000, £100,000, or more can give you time to recover without financial stress or the need to urgently return to work.
3. Cover for Over 40 Serious Conditions
Most policies now include cover for more than 40 illnesses, such as:
- Cancer
- Heart attack
- Stroke
- Multiple sclerosis
- Parkinson’s disease
In 2023, over 91% of critical illness claims were paid out by leading UK insurers, showing this protection works when you need it most.
4. Tax-Efficient Structuring Through Your Ltd Company
When set up correctly, critical illness cover can be:
- Paid for by your limited company
- Eligible for corporation tax relief (in some formats)
- Structured to avoid personal benefit-in-kind tax
This makes it more cost-effective than paying personally, especially when combined with relevant life or key person cover.
5. Mortgage & Debt Protection
If you’re the main breadwinner, how would your partner or children cope with your mortgage if you became critically ill? A lump sum can pay down or clear debts, providing long-term security.
6. Bridge Contract Gaps and Market Instability
Gaps between contracts already cause income instability. A serious illness could turn a short pause into long-term financial hardship. Critical illness insurance acts like financial insurance against these risks, especially in high-variation fields like IT, consulting, and construction.
7. Peace of Mind During Recovery
Recovery from illness isn’t just physical—it’s also mental and financial. Critical illness payouts allow you to focus on healing without pressure, which can significantly improve long-term outcomes.
Bonus: Combine With Relevant Life or Key Person Cover
If you want:
- Business continuity if you're unable to work (key person insurance).
- Tax-efficient life insurance that avoids benefit-in-kind tax (relevant life cover).
These can complement critical illness cover for a full protection suite.
In Short
As a contractor, you are your own safety net. Critical illness cover gives you the financial backup needed if life throws you a curveball — protecting your income, your business, and your family’s future.
For even more information, read our blog The Truth About Critical Illness Cover, which explains why every Contractor, Inside or Outside IR35, needs this insurance protection.
The Essential Questions...
What if illness meant you were unable to work?
How would you pay the bills?
Your income covers many expenses, from rent or mortgage payments to groceries, utility bills, and more. Could you cope if it was suddenly taken away? Rather than dent your savings or make sacrifices like downsizing or selling your home, Critical Illness cover provides a safety net in the form of a significant lump sum payment.
Could You Afford the Treatment?
Illness or injury and lost income are a double blow, potentially introducing costly medical bills when you’re unable to earn. A lump sum payment could help keep you afloat financially and protect your family for the future while also covering the cost of treatment. It can even be used to fund accessibility renovations in your home, such as ramps or specialist medical equipment.
What About Your Family?
If your loved ones rely on your income, Critical Illness Insurance ensures they’re not impacted by your illness or injury any more than necessary. The tax-free payment it provides could help you continue to cover domestic bills, childcare costs, or school fees.
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Resources for Freelancers, Contractors & Professionals
Explore more insights to help you decide:
- Thinking to yourself... “It’s Too Expensive”, “I’m Young, Healthy, and Single” or “I’m worried they won’t pay out...” Read our page on Why Personal Protection Matters and why these common objections miss the mark.
- Being a contractor in the UK can be challenging… check out our article about The Evolving Landscape of UK Contracting.
- Considering Critical Illness Cover? Read our articles: Why consider Critical Illness Cover and Can you get CIC with Type 2 Diabetes?
- Do you know the difference between Critical Illness Cover and Income Protection, find out more here.
- Contractor Tips: What expenses can you claim
- Download your FREE Broadbench Guide To Tax Savings
- Download: Broadbench - Tax and Financial Risks
Ready to make sure you're protected?
Fill out the form below to arrange a time to speak to a Critical Illness Insurance expert.
FAQs
What is Critical Illness cover?
Critical Illness cover (also known as Critical Illness Insurance) is a medium to long-term policy which covers you for a serious illness during the policy period so you don’t have to worry about your finances.
What illnesses are covered?
Each insurer has its own list of critical illnesses that they cover. Typically, you’ll be insured for heart attacks, cancer (depending on the type and the stage), strokes and permanent disabilities due to an illness or injury. If you have a specific illness that you want to be covered for, get in touch with a Broadbench adviser who will be able to guide you to the right insurer.
What factors impact the policy’s cost?
There are a number of factors that can influence the cost of your monthly premium including:
- Your age
- The level of cover you wish to take out
- Whether you’re a smoker or have previously smoked
- Your current health, weight and family’s medical history
- Your job (some occupations carry higher levels of risk than other professions and therefore may increase the monthly premiums)
What are the benefits of Critical Illness Cover?
Firstly, to keep a roof over your family’s head. With Critical Illness Cover, you can rest assured that you will be able to keep up with mortgage repayments or even pay off the full remaining amount. You’ll receive a tax-free pay-out – If you are diagnosed with a Critical Illness, the money you and your family receive is tax-free. Lastly, it gives you peace of mind – No one knows what the future has in store but with Critical Illness Cover, you will be protected for a number of illnesses. This way you can rest assured that you and your family are financially secure.
You may be able to get small multiple payouts. Most policies will only pay out once, but some insurers will make a small payment if you are diagnosed with a less severe illness. In this case, your policy would continue, and you should be able to make a further claim down the line if you’re diagnosed with a more critical illness.
How is Critical Illness different from Income Protection?
To claim on a Critical Illness policy, you must be diagnosed with a medical condition that meets one of the definitions on the policy. In contrast, to make a claim on an Income Protection policy simply relies upon you being unfit for work, no specific medical condition is needed – therefore the pay-out is to cover you until you’re fit to return to work.
Who do I notify in the event that a policyholder passes away?
You should notify the claims department of your insurer, you will find this contact info on the policy documents or their website.
Why do contractors need Critical Illness?
When you work for yourself, you no longer receive the same benefits as regular employees. These benefits include payment to cover a long period off work due to sickness. The alternative to receiving ‘sick pay’ is to receive state benefits, however, this may not be enough to replace your income.
If you’re eligible, you may be able to receive Employment and Support Allowance (ESA) – which ranges from £70 to just over £100 a week, depending on your circumstances and the seriousness of your illness or disability. Will that be enough to cover your household bills and family’s lifestyle? If not, then you should consider Critical Illness cover.