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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 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 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.
About the Author:
Michael Challiner has 15 years experience in financial services marketing at
senior level. Michael now works as the editor of http://www.express-life-insurance.co.uk
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