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Critical illness Insurance. Do you really need it, or is it a waste of time
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.
Futher reading http://www.express-life-insurance.co.uk/what-is-critical-illness-insurance.htm
Futher reading http://www.life-assurance-bureau.co.uk/critical-illness-cover/faqs/critical-illness-faq-home.htm
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