The Risks of Critical Illness Cover

Firstly we would like to make clear that we believe that Critical Illness Cover is a vital part of most people’s insurance needs. The policy will pay a lump sum tax-free benefit to an individual who falls ill with an insured critical illness.

That being said, there are plenty of reports in the media that paint Critical Illness Cover in a bad light. In this article we would like to touch on some of the most common misunderstandings surrounding Critical Illness Cover.

1. I am sick I can claim on my policy

Not necessarily true. A Critical Illness policy will pay a lump sum benefit if a successful claim is made against one of the illnesses covered by the policy. Most insurers provide protection against a core set of conditions such as heart attack, stroke, multiple sclerosis and cancer that match a certain criteria, but the definitions of the cover do differ. So whilst one insurer may pay for any evidence of a heart attack, another may only pay if the heart attack was of a specified severity.

Modern Critical Illness policies typically cover a minimum of 40 conditions for full policy payments and there is now an increasing trend for insurers to pay partial benefit claims for some lesser severity illnesses.

Note! You are not covered for every possible condition and you should make sure that you are fully aware of the illnesses and definition criteria on the policy that you purchased.

2. My insurer now offers cover for more conditions, so I am covered for them

Also not always true. Most insurance providers offer terms of cover based upon the policy conditions that are active at the time of the policy start date. This will include terms on which you can claim on the policy and the amount of conditions covered. The price of your policy is reflected in the amount of benefits associated with your policy at the time that it is put in place.

As a broad example, Critical Illness Cover with insurer A ten years ago did not offer a claim benefit if the insured has a cardiac arrest. In the present market insurer A now offers a claim against cardiac arrest as part of its Critical Illness contract. This means that someone with a Critical Illness policy started ten years ago with insurer A is likely to not be covered for cardiac arrest, but someone today would be.

Note! It’s not always the case that newer policies cover more conditions. Some older Critical Illness policies covered most types of cancer and angioplasty, which are not always covered to the same degree on newer plans.

3. I have had a critical illness listed on my policy, the policy will pay out

Generally yes so long as your condition matches the insurers definition; for example Parkinsons Disease is usually only covered if it results in permanent symptoms. It is important to remember though that Critical Illness policies come with a survival period clause. It is normal for an insurer to require you to survive your diagnosis of a critical illness by 14 days (possibly up to 30 days) or else a payment will not be made.

For this reason it is often recommended that Critical Illness Cover is combined with Life Insurance as this will guarantee that a benefit payment will be made if you do not survive past the 14 day period. Combined Life and Critical Illness Cover is very closely priced to standalone Critical Illness Cover.

Note! Remember that critical illness payouts usually are not assessed based on your ability to work, they are assessed based on the severity and symptoms of specified conditions.

4. I have a critical illness I will get my payment straight away

Yes and no. If you are diagnosed with a critical illness that is at a severity that matches the claims definition on your policy then yes you should receive a benefit payout. This payment will happen once the insurer has verified with your medical care professionals the type of illness that you have and the severity of the condition. The insurer will also check with your GP that your medical history was accurate at the time of your application to make sure that no non-disclosures have been made.

Note! You must be honest and truthful when applying for cover. Any material non-disclosure (anything that could have meant your application would have been treat differently) could affect a policy payout.

5. Insurers will do anything not to pay a claim

When an insurer accepts your application for Critical Illness Cover they are doing so based on a snapshot of your health, occupation and lifestyle choices at the time of your policy start date. This means that the terms that they offer you are based on your health not at the time of application but on the actual date that your policy starts. If you place your application for Critical Illness Cover and it is due to start in two weeks any change in your health, change in occupation, new extreme sport or plans for extensive abroad travel must be detailed to the insurer.

Insurers have started to publish their claim statistics to show how much they do actually payout in the event of critical illness claims. Most Critical Illness claims are paid with a small percentage rejected due to non-disclosure by the client or because the claim did not meet the definition of illness set by the policy conditions.

Note! It is essential that you inform the insurer of any changes to your circumstances between your application submission and your policy start date, or the policy could become void under non-disclosure. There are a couple of exceptions to this rule, but always err on the side of caution and ask your adviser.

Critical Illness Cover may have had bad press in the past, but claims statistics from insurers do show that they pay out far more for these policies than not. The key is to know what you are and are not covered for in the policy that you choose.

If you would like to speak with one of our advisers about the range of Critical Illness policies available today then please feel free to call us on 0800 567 7450 for a no obligation discussion. You may also find our online quotation system useful to get a rough idea as to how much Critical Illness Cover could cost you.