There’s a new critical illness policy on the market which attempts to go some way with regard to sorting out the perplexity regarding exactly what is, and is not, covered when it comes to claiming on the policy.

Traditional critical illness policies tend to cover up to 35 listed medical conditions. Policyholders could become seriously ill with a condition that doesn’t fall into the scope of the policy and find that their illness is not covered, whilst others may be diagnosed with a listed illness with a lower “grading” which is relatively easily treated, for which they get a full payout.
Because of this inequality, the Financial Services Authority is uneasy with regard to insurers failing to fully understand that cover is restricted to certain specific illnesses.

This new product is marketed by the Prudential, under the name of the Flexible Protection Plan, and is unusual in that it claims to cover an amazing 140 medical conditions. However, cover is based on the severity of the condition which could possibly cause some uncertainty regarding the grading of these illnesses.

This is how the plan works:

Listed in the policy are practically all serious illnesses and the payout when one these is diagnosed will be graded according to the severity of the condition. The Prudential says that by tying payments to the degree of seriousness of the illness means that more payments can be offered to people with debilitating illnesses, who may otherwise get nothing at all. An example of this is that should you lose the sight of one eye; the Prudential policy will pay 25% of the sum assured. Normally, critical illness policies would only pay out when total blindness occurs. In all, 140 severe conditions are covered.

A spokesman for one of the specialist financial advisers welcomed the range of the policy, but voiced some concern regarding the implementation of these severity-based payments, saying that it would be open to argument as to what level of severity some illnesses would be graded as. It was felt that it would not be advisable to enter into this type of policy unless you had a very clear understanding of exactly how it would work. We quote “It will be up to the consumer to decide whether a guarantee of getting a smaller payment is better than possibly getting nothing.”

The cost of this new policy is approximately twice as much as conventional critical illness cover.

If your main concern regarding insurance cover should you become critically ill would be the financial outcome, it might be better to consider life insurance. Particularly, if you have a family to support, you may need something that is going to guarantee their lifestyle in the worst case scenario and with the addition of some income protection cover, which would meet outgoings in the event of you becoming unable to work due to illness. This type of cover, unlike the critical illness policy, protects you against common conditions, which result in you being unable to carry out your work.

The best course of action would be to contact a broker and check out the alternatives. The internet’s a good place to start and there are some good internet discount’s available, along with plenty of advice. A good broker will be able to compare the products available and come up with the right insurance product for you.

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Critical illness cover (CIC) is a type of insurance which
provides a significant one-off payment if you are diagnosed with
a specified life-threatening condition – specified being the
important term, because if your illness isn’t in the terms and
conditions – you won’t get the payment. Over recent years,
critical illness cover has gained in popularity due to lower
costs and apparent simplicity.

Critical illness insurance can be sold as part of a mortgage
package or additionally as a stand-alone policy. Critical
illness cover can also be commonly associated with life
insurance, with certain CIC policies paying out either on the
diagnosis of a particular illness or on death, but not both,
whilst other CIC policies pay out in both events.

When you first purchase the critical illness insurance policy,
there might be an option for buy-back insurance, this would
permit you to buy additional critical illness cover or life
insurance, typically at a minimal cost, after you have made a
claim on your existing CIC policy. It is often worth considering
such an option, as the survival rates from a critical illness
are usually very good and it can be extremely difficult to
obtain new cover following a critical illness. Buy-back critical
illness cover usually protects against the three major critical
illnesses: heart attack, stroke and cancer from which you are
most likely to recover, but also risk an attack later in life.

Bear in mind that when you take out life critical illness
insurance, there is a standard waiting period between diagnosis
and possible payout, from six months to a year for certain
conditions, such as total permanent disability. However, if the
diagnosis is very transparent, it is possible that the insurer
would consider waiving the waiting period. The maximum payout
varies from policy to policy thought it’s not unusual to see
capped payouts of £500,000 or £1 million, though cover for
higher amounts might be available on request. When the policy is
sold as part of a mortgage package, the lump sum is designed to
pay off the loan on the home, but with other policies, there may
be no restrictions on how you use the money. Suggested uses may
encompass covering living expenses whilst you are off work,
though the money could additionally pay for private medical
treatment, carer services, home improvements, career retraining,
help for your dependents and even a holiday or break away.

Nearly all critical illness insurance policies cover seven main
conditions: cancer, heart attack, stroke, kidney failure,
coronary artery bypass, multiple sclerosis and major organ
transplant. Policy exclusions in critical illness insurance may
include Alzheimer’s or Parkinson’s disease if diagnosed after
the age of 60. Don’t be seduced by long lists of ailments – as
other policies may include these but under a broader heading. It
is important to note prior to taking out a policy that there may
be certain exclusions in the insurance contract which may
prevent payout due to life choices and circumstances. According
to the Association of British Insurers, the most common
exclusions include:

* Aviation * Criminal acts * Drug abuse * Failure to follow
medical advice * Hazardous sports and pastimes * HIV/AIDS *
Living abroad * Self-inflicted injury * War and civil commotion

The consumer organisation Which? estimates that two thirds of
the population suffer from a critical illness at some point in
their lives. However, whilst the principle of critical illness
insurance might be relevant, it is always worth ensuring your
policy meets your exact needs, so if the worst happens, you’re
not caught out by the small print. It’s important to shop around
for quotes and different policies. Comparison sites such as
moneynet and moneysupermarket will allow you to do this.

Resources:

Critical illness insurance guide
from Channel 4

Critical illness insurance price comparison research

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GREAT NEWS! There’s now a one in five chance of you winning the lottery before you retire. Getting excited? Think it’s just a matter of time before you win? Think again, it’s not going to happen – but it got you thinking!Now think of the same odds but this time about bad news. There is a 1 in 5 chance for men and a 1 in 6 chance for women that a long-term critical illness will prevent them from working. Sorry – this time it’s true.Insurance cannot change those odds but it can alleviate the potential financial wreckage caused by being unable to work through long-term illness and still having a family and home to support. Convention declares that every good family man should have life insurance. It’s easily understood, it’s accepted and your next door neighbour has it too. But what about it’s close cousin critical illness insurance? You’ll have to walk several streets to find someone who has it. Given the odds, why? After all it pays out a tax-free lump sum immediately an insured critical illness is diagnosed. The usual reason given is its expense. Yes it is more expensive than life insurance but after all it’s providing cover for a greater risk. You’re much more likely to experience a critical illness than die before your normal retirement age. Indeed, the average age for a claim is 47. So clearly there is much more to the public’s resistance. Not understanding the risks or “head in the sand syndrome” are certainly major factors. After all a lzheimer’s disease, bacterial meningitis, brain tumours and leukaemia plus the long list of other illnesses typically covered by critical illness insurance, are not matters we care to think of nor know much about.

Could there be another reason? Well there have been repeated newspaper articles about people who claim on their critical illness policy only to have it turned down on an apparent technicality – the inference being that the insurance company cannot be trusted. Indeed, Standard Life freely admits that it turns down around 20 % of critical illness claims.

The truth is that behind every story of rejection there’s a harrowing story of illness, distress and sorrow – and potential copy for the journalist. But that in itself, is not evidence that the insurance company is guilty of devious behaviour.

Yes insurance companies do make mistakes, but more often than not the claim was invalid from the outset. There are two main causes. Firstly, the policyholder is claiming for an illness that is not one of the critical illnesses scheduled in the policy documentation. Regrettable, but it’s a fact that if the illness is not listed it isn’t insured and the policy won’t pay out.

The moral is to closely compare the illnesses covered by competing insurance companies and buy the one with the most extensive coverage of illnesses. If you don’t, sods law will prevail…

The second major reason for refusal is a failure to disclose all relevant matters on the original application form. For example, if the applicant fails to disclose in response to the insurance company’s questions that his father a died of a heart attack aged 50 or that he is having medical tests for headaches, then the insurance company will wrongly assess the risks it is being invited to insure. Had the insurance company known this extra information they might have increased the premium, or asked the applicant to go for a medical examination, or waited for the outcome of tests, or even refused to provide cover. By failing to disclose, the applicant has effectively obtained cover on false pretences or at least on inaccurate information.

Thereby lies the second moral. Always provide the truth and the full truth on your application form. Anything remotely relevant to your medical condition must be disclosed.

All this points to the need for professional insurance advice. Critical Illness policies do vary and it can take an experienced eye to evaluate the best policy for your circumstances and pocket. This doesn’t mean that you have to miss out on the discounted premiums available online – but do thoroughly talk it through with one of their telephone based advisers and do make sure you read the schedule of claimable illnesses when it arrives in the post. Then sit back knowing you’ve taken another important step to protect your family’s finances. Lets all hope that you’re one of the majority who are happy never to claim.

It’s now time to concentrate on enjoying life.

Michael Challiner has 15 years experience in financial services marketing at senior level. Michael now works as the editor of Express Life Insurance Futher reading What is Critical Illness Insurance.Futher reading Critical Illness Information Resource

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