Critical Illness Insurance. Critically important – time to take cover by Michael Challiner

Back in 1999, the Imperial Cancer Research Fund stated that one in every
three people in Britain will be diagnosed with cancer at some point in
their life. With rapid medical advances the chances of survival from a
major illness are improving but the consequences of suffering such an
illness continue to be substantial and life-changing.

Critical illness insurance policies are designed to help you cope with
the changes which will be necessary should you be diagnosed with a
“qualifying medical condition”. Most policies will pay out following a
diagnosis of heart disease, cancer, stroke, renal failure, paralysis,
major organ transplant and coronary artery bypass surgery as well as a
range of other conditions. There is normally a one-off tax free payment
which is intended to assist you with costs, typically the need to adapt
your home or car or maybe re-train for a different occupation. It's not
only the bread-winner that can benefit from this type of cover and you
should take account of child care and housekeeping costs which would be
involved should Mum be out of action.

Unfortunately, at a time when most people are suffering from the shock
of learning that they have been diagnosed with a critical illness, they
and their families may learn some additional disturbing news. The
insurance industries latest figures show that, on average, around a
quarter of all claims are rejected!

As soon as a claim is made, the insurance company will request a huge
amount of information from your doctor. It's quite likely that much of
this information is not relevant to the illness for which the claim
relates. The insurer is using this information to ascertain whether or
not the insured has been completely truthful on the original insurance
application form.

The reason for this is what the insurers call non-disclosure and if any
medical information has been omitted, they can use this as grounds for
refusing the claim.

It appears that the non-disclosure may not be related to the critical
illness. Claims have been turned down for various reasons, including the
case of a woman with breast cancer whose case was rejected because she
hadn't listed treatment for depression on the original proposal form.

The rejection rates are shown as follows:

Company % of rejected claims

Scottish Equitable Project 28%
Norwich Union 26%
Friends Provident 25%
Legal and General 22%
Bupa 21.5%
Skandia 21%
Prudential 20%
Standard Life 20%
Scottish Widows 18%
Scottish Provident 11%
Scottish Equitable Guardian 10%

Average 23.5%

Despite the insurers claim that these rejections are perfectly legal,
the Law Commission appears to think differently. There has been a
consultation document published recently and the Commission makes the
statement “It is possible for an applicant to act reasonably and
honestly and yet still fail to meet the duty of disclosure.” The
conclusions of these consultations will be reported on as soon as they
are available.

It is therefore extremely important that when applying for this very
valuable form of insurance, you disclose all previous illnesses. It's
probable that if you have to claim, then your medical records will be
thoroughly examined and if the insurers consider you omitted medical
information, they may “throw out” the request.

Compare companies for the best rates. Read the small print. Spend some
considerable time in listing medical conditions. Relax – it may never
happen.

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