Critical Illness Insurance
Do you really need it, or is it a waste of time?
by Michael Challiner **
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
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 Alzheimer'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.
illness insurance only covers a very limited number of illnesses and
circumstances, which will be listed in the finer print so it is imperative
that each policy is studied very carefully prior to purchase to ensure it
provides the necessary cover.
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