Michael Challiner: Critical illness insurance - every detail counts
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Written by Michael Challiner
If you find yourself in the position of making a claim on your critical illness insurance, you probably won't be expecting to be asked a long list of questions from the insurer. According to a number of newspaper articles, claimants are facing an insensitive attitude and sometimes non-cooperation from the insurers in question. In this article, we find out why.
The reason for this recurring problem is that the insurers are not prepared to pay out until they are absolutely certain that your past health record does not reflect any non-disclosure. When you first applied from the cover, you will have provided extensive information about your health record, but the insurer when you make a claim, will recheck that information to ensure that it is correct. They will also want the information verified by your doctor.
Obviously, the insurer does not want to pay out without good reason. Claims are usually over £100,000, which can be considerably more than other types of insurance. Once you make a claim, they will look at your medical records in extreme detail to ensure that everything you've mentioned on your application matches the truth. Every little visit to the doctor will be examined in detail. Unfortunately for the claimants, this kind of delay can be very upsetting at a very difficult time.
The insurers say that they are well within their rights to check out all these details. They say that they have to be sure that their customers are not cheating them, because if they find that you omitted some details on application form, your claim will be made invalid. This is known as non-disclosure, and even if the information that you failed to provide has nothing to do with the illness, in the event of a claim the insurer would say that the premium you paid was different because of the omission. Your claim would therefore be invalid.
People that make a claim within the first five years of a policy are treated with the most distrust. This is known as an ‘early claim’, and the insurer will be looking out for evidence that the claimant suspected that they were suffering from an illness when they took out the critical illness insurance policy.
All this wrangling has attracted negative publicity because it is causing lots of extra pain and worry for people who are already ill and distressed. We think that insurance companies need to soften their approach at this difficult time, and deal with people on a more personal basis if they want to lessen this publicity. It would also seem that, as a result of this adverse publicity, new applicants are choosing to take out their policies with insurers who have published the lowest rejection rates. Companies that are known to put up a fuss in the event of a claim are experiencing lower levels of applicants.
However, we don't think that avoiding the insurers who have the highest refusal rates is any great help. The figures that are published do not give the full picture. Scottish Equitable Protect recently published figures showing that they only paid out on 72% of claims, Friends Provident only paid out on 75% of claims. Scottish Provident paid out on 86.3% of claims, so we can expect applicants to favour them, but that shouldn't necessarily be the case.
We say this because the figures depend on how long the insurer has been operating critical illness insurance. Rejection rates will be highest with the companies that have only been running critical illness policies for a short time, so therefore the figures are misleading. As a result, Guardian Financial Services, for example, looks like one of the best because it pays out on 90% of claims. However, they have been in the business for over 15 years, and have had time to absorb peaks and troughs.
The recent publicity has affected the application rates for critical illness insurance. This is unfortunate as the insurance is very important, and is in fact essential for certain circumstances. For example, if the main breadwinner becomes seriously ill with cancer, the family could find themselves in financial difficulties. Critical illness insurance would help out considerably in this case.
We say, don't be put off by the publicity. If you need critical illness cover, you should get it. However, you must be aware that policies vary greatly, and although the basic policies will cover one or more of the most common serious conditions, you may be better off with a comprehensive plan, which will cover:
Alzheimer’s disease
Aorta graft surgery
Aplastic anaemia
Bacterial Meningitis
Benign brain tumour
Blindness
Cancer
Cardiomyopathy
Chronic lung disease
Coma
Coronary artery by-pass surgery
Creutzfeldt-Jakob disease
Deafness
Dementia
Heart attack
Heart valve replacement or repair
HIV or AIDs from an assault, blood transfusion, occupational duties or
accident
Keyhole heart surgery
Kidney failure
Loss of independent existence
Loss of limbs
Loss of speech
Major organ transplant
Motor Neurone disease
Multiple Sclerosis
Paralysis/Paraplegia
Parkinson’s disease
Progressive Supranulcear Palsy
Stroke
Third degree burns
Total and Permanent Disability
Cover for children
Critical illness insurance is quite complex, and we definitely recommend seeking independent financial advice. There is a lot of information on the Internet that can help you, search on the phrase ‘critical illness insurance’ for reams of advice. However, do be sure that there is someone you can talk to before you sign up.
About the Author
Michael Challiner writes for Brokers Online, a large Uk finance portal who specilise in Life Insurance ( http://www.life-assurance-bureau.co.uk/life-insurance/ ), Life Assurance ( http://www.life-assurance-bureau.co.uk/ ) and Critical Illness Cover ( http://www.life-assurance-bureau.co.uk/critical-illness-cover/ ) all online.
Article Source: http://www.nichinfo.com
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