With payout rates climbing, Critical Illness is now a prime opportunity!

Article published on 25th May 2010

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In the past some Critical Illness Cover policies have received bad press because of there poor claims rate and complicated condition definitions.

Much of the bad press was written prior to the 2007 clamp down by the Association of British Insurers (ABI) who 'cleaned' up the Critical Illness insurance market and made it much easier for clients to claim on and understand the policies.

What is Critical illness Cover?

Critical Illness Cover is an insurance policy that will pay a benefit to you and your family, if and when your are diagnosed with a severe illness covered by the plan. The severe illnesses covered are known as Critical illnesses and generally include things like heart attacks, strokes and advanced cancers.

The list of Critical Illnesses covered by a specific policy can change between insurance companies but as of the ABI's clean up, in 2007, they must all cover a basic set of illnesses and conditions.

The payout from a Critical Illness Insurance policy is paid in a lump sum upon diagnosis and people tend to use it for covering loss of income, paying off mortgages and providing private medical care. There are no conditions about what you can use the payout for, its entirely up to you!

Why were claim rates so low?

In the past claim rates for Critical illness policies were far lower than life insurance or income protection policies. This largely stemmed from conditions which were not covered by a policy or in some cases, lack of severity in the conditions.

Another major issue faced by the insurance companies and resulting in high non-paid claims rates was the issue of non-disclosure. Insurers will now go out of there way to ensure they have all the correct information when they underwrite a policy application to avoid problems at the claims stage. This can include writing to a consumers GP or asking them to attend a short medical (both paid for by the insurance company).

The insurance industry as a whole has now changed it mindset and realised that the complicated nature of these policies was not fair to consumers and claims rates are now much much higher.

In 2009 it was reported that over 90% of Critical Illness insurance claims where paid. Of the remaining 10%, 8% were due to the condition not being covered by the policy and 2% because of non-disclosure.

Is Critical Illness Cover worth the premium?

With the rate of successful claims continuing to climb, Critical Illness Cover is now a highly suitable and worthwhile insurance product for a wide range of people.

It should be ideally taken after advice from an insurance advisor to ensure you fully understand the cover and to make sure it is the most appropriate policy for your individual needs.

Like any insurance policy the premium varies depending on your circumstances but assuming the premium is within your affordability range, Critical Illness Cover can be an extremely important part of your protection portfolio.

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