How Ill Do You Have To Be To Make A Critical Illness Cover Claim?
Critical Illness Cover (CIC) pays out the total sum insured, which is tax-exempt, if you are identified with a life-threatening complaint which renders you incapable of working.
Insurers are establishing that while life policy claims are dropping, they are having to credit more and more claims on CIC policies. The effect of this is that the cost of CIC is becoming significantly more expensive than cheapest life insurance. If the magnitude of CIC claims drop then understandably the cost of premiums will drop too.
The cost of Direct Line and Swiss Life’s CIC has gone up by about 19 and 24 percent respectively. But the likes of Liverpool Victoria and Scottish Equitable win in the price rise race with increases of up to 60%. Other cheap life cover insurers are attempting to charge more for CIC as well as the industry contemplates over the designation of ‘life-threatening medical issue’ and medical science makes big leaps forward in the supervision and control of individual conditions.
The Association of British Insurers has identified cover for heart issues and breast cancer, for example. If these ailments are diagnosed early on they are no longer considered to be ‘life-threatening’, at least for some people. Another example is diabetes. Today Tesco is the only life assurance supplier which still allows this ailment on its inventory of critical ailments covered.
A CIC plan usually lasts for an fixed period, for example on a par with the length of time on a home loan, and there is no variance in the fees. The regular payments are pricey for this insurance. Insurers are now looking to offer reviewable policies where both the health conditions covered and the fees paid are looked at again every 5 years, which should be more cost effective.
Ray Mears, group manager of the independent financial adviser division of Direct Line, reckons that more people will highlight the reviewable schemes as they become considerably cheaper than the guaranteed plan.
Aviva continues to offer a guaranteed CIC but has put its fees up for that. It has identified a reviewable policy as another choice. Aviva and Bupa have ceased to provide guaranteed CICs.
Ronnie Martin, protection director at Bradford & Bingley, says, “The reviewable regular payment will be typically [around] 15 per cent lower than the guaranteed cover.”
A current guaranteed CIC scheme cannot be updated to redefine any medical issues which are currently defined as ‘life-threatening’ but which may not be defined as that in the future. So if you have this type of policy already and are content to pay the fees you don’t have to think about this.
If you are planning to take out a CIC scheme expect to reduce costs for a reviewable policy. But if you want the extra wellbeing a guaranteed policy provides, take it while there are still some present, and don’t forget you will have to pay a little more.