Summary

Critical Illness insurance has been getting a bad press. This article explains the reasons and the truth behind the situation.

Critical Illness Insurance The non-disclosure problem

Author: Michael Challiner

Buying Life Insurance? One tip to save you thousands!: Life companies keep their initial quoted prices low by being choosey on who they accept on standard terms. Having made a formal application, two thirds of applicants will face a loaded premium. This article explains why and what the shopper can do about it choose an online broker!
Tips for Choosing a Life Insurance Company: This article argues that you need to consider the merits of the life insurance company providing the policy, as well as the policy itself.
Tips for Choosing a Life Insurance Company: This article argues that you need to consider the merits of the life insurance company providing the policy, as well as the policy itself.
Critical Illness Insurance. Critical or Ridicule?: An introduction to one very valuable form of life insurance called critical illness insurance.

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If youre in the unfortunate position of having to make a claim on your critical illness insurance policy, the last thing you want is insensitive hassle or apparent non co-operation from your insurer. But according to numerous newspaper articles, thats precisely whats happening.

The core problem is that before theyll pay out, the insurer will always want to make exhaustive enquiries about your past health record. Whilst youll have provided them with lots of similar information when you initially applied for the cover, the insurers will now insist that all the information is rechecked. And if at the time you said you werent a smoker, theyll now want this verified by your doctor.

The reasons are obvious. Theyre faced with a big claim, typically way over £100,00, and they want to be certain that you told them the entire truth about your health when you first applied. This means that now youve claimed, theyll crawl over your medical records in great detail checking that you disclosed everything on your application. Every small and apparently insignificant detail will be subject to intense scrutiny. The problem is that their reams of correspondence can be quite upsetting for you. (medical insurance)

The insurers defend their procedures saying that they need to be certain that when they accepted the business, you disclosed the full truth about the factors affecting your health. They want to be sure that you didnt cheat by omitting some information in order to dupe the company into issuing a policy when they otherwise might not, or to help you qualify for a lower premium. Either way, non-disclosure as they call it, is cheating and a valid reason for them refusing your claim. It doesnt even matter if the information you omitted ultimately had nothing to do with the illness that occasioned the claim. The insurers position is that every piece of information you provide was used to work out your premium and any omission affects the calculation.

The insurers are particularly distrustful if the claim arrives within the policys first five years. Any claim arising during this period is classed as an "early claim" and the insurers are particularly watchful for policyholders who took out the critical illness insurance already suspecting that that they were already ill.

The problem is that all this intense scrutiny attracts a very bad press. If youre very sick and distressed, the last thing you want is lots of questions and high-handed hassle from your insurer. (life insurance policies)

Theres undoubtedly a conflict here. If they are to neutralise the bad press, the insurance companies need to work much harder at softening the enquiry process and they must liase much more closely with their claimants. Insurers must present a much softer centre at what is a most distressing time for their claimants.

All this adverse PR has had two effects on the critical illness insurance market. Applicants have apparently been favouring insurers who publish the lowest rejection rates and others have withdrawn from making any application.

In practice, avoiding insurers who publish high refusal rates has little benefit. Thats because the published figures can be misleading. The latest figures show that Scottish Equitable Protect has refused to pay out on 28% of critical illness claims followed closely by Friends Provident at 25%. If you compare these figures with Scottish Provident at 13.7%, many potential policyholders can be forgiven for favouring Scottish Provident. But thats not necessarily the best decision.

The problem with interpreting these figures is that the figures themselves can be distorted by how long the insurer has been active in the critical illness market. As rejection rates are highest with policies that have only run for a few years, then companies that are new to the critical illness market will automatically have the highest rejection rates. This leaves companies such as Guardian Financial Services looking good with a rejection rate of just 10%. The truth is that the Guardian has been in the market for over 15 years and has a mature book of business. (car insurance )

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Todays Tip
If you get a life insurance quote from your bank or even direct from a Life Insurance Company, youll probably find its very expensive. The cheapest quotes are normally available through an online life insurance broker. These specialist brokers search the market for you - so youre almost certain to get a much cheaper quotation.

Did you Know?
If you smoke, the cost of your life insurance will be about double. And its no use just giving it up a few weeks or months before you apply. Most life assurance companies say you mustnt have smoked for a least 12 months prior to the application - and some insurers extend this to 5 years! (travel insurance)

Todays Tip
Dont buy direct from a Life Insurance Company until you have received at least two life insurance quotes from a specialist life insurance broker. That way youre bound to get a great deal.