Big Changes On The Horizon For Critical Illness Insurance.
In recent years sales of critical illness insurance have
flagged. The primary cause is the huge 70% increase in premiums
experienced during recent years. For many, critical illness
insurance has simply priced itself out of the market.
It's not that critical illness insurance is a bad idea. After
all it pays out a lump sum if the policyholder is diagnosed with
one of the many critical illnesses listed on the policy and the
policyholder survives at least 28 days from diagnosis. (Note:
some policies have a 14 day survival period.) Most policies have
a huge list of insured illnesses although about 60% of claims
are for cancer - not surprising, as 1 in every 3 people will
develop cancer sometime in their lifetime. In fact when you look
at the concept of Critical illness insurance you can easily make
a case that everyone living on earned income should have a
policy. It's designed to give you a pot of capital to live on if
serious illness prevents you from working normally.
Premiums have increased dramatically because medical advances
have meant that many illnesses that proved fatal in the past are
becoming quicker to detect and easier to treat. Hence insurance
companies have found themselves paying out earlier on claims and
on illnesses which are not necessarily debilitating - which was
the original purpose of critical illness insurance.
To give you a better idea of the sort of illnesses we're talking
about, here's a typical list:
Alzheimer's Disease
Aorta Graft surgery
Bacterial Meningitis
Blindness
Brain Tumour
Cancer
CJD
Coma
Coronary Artery by-pass surgery
Coronary Artery Angioplasty
Deafness
Heart attack
Heart Valve replacement/repair
HIV/AIDS resulting from blood transfusion
Inability to perform your duties of occupation
Kidney failure
Leukaemia
Loss of limbs
Loss of speech
Major organ transplant
Motor Neuron diseases
Multiple Sclerosis
Occupational HIV/AIDS
Paralysis
Paraplegia
Parkinson's disease
Stroke
Third Degree burns
Any illness that results in Total and Permanent disability
Insurance companies have at last realised that they're not going
to get anywhere marketing policies that people can't or won't
afford, and where the companies can't afford to lower prices. So
it now looks as if insurers such as Scottish Widows are
considering a break through - splitting the cover so that the
prospective policyholder can specify which illnesses he or she
wants to insure against. It's a form of "menu pricing" - cover
for each illness would have a price and you simply select which
illnesses you want to insure against.
Whether such insurance proves popular will very much depend on
the cost. For example, if cancer accounts for around 60% of
current claims, you'd expect the premium for covering cancer
alone to be about 40% cheaper than a full strength critical
illness policy. We'll have to wait and see.
If you're interested to find out how much a standard critical
illness policy would cost you, you'll find it cheapest on the
Internet. The best sites to look out for are the independent
discounting brokers who deal with all the big insurance
providers. These brokers can search the whole market for you,
come up with the cheapest insurer, and discount their price. Try
to use a broker who'll also give you personal advice on the
phone as some policies do vary in the scope of their cover.