Critical illness insurance; how to find the right policy (and what might be in the small print)

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If you’ve decided to take out a critical illness insurance policy, you’re in the minority. Despite the fact that women are more likely to suffer from a serious illness than men, most don’t have critical illness insurance.  What is it and what should you look for?

What critical illness insurance covers

Most critical illness insurance policies cover around 30 illnesses, although some cover far fewer (and a few policies cover more). If you’re not sure how critical illness insurance works, read the article entitled Do you need critical illness insurance? What to look for and what to avoid.

Is critical illness insurance worth it?

Like many kinds of insurance, critical illness cover will seem like a bad deal if you never have to make a claim. But you could get £150,000 of cover for around £35 a month, if you’re relatively young, healthy and a non-smoker.

Do these policies pay out?

Over the last few years insurance companies are paying out a higher percentage of claims than they were. On average, companies now pay out around 97% of claims.

The number of claims turned down for so-called ‘non disclosure’ — where someone didn’t tell the insurer about an illness they’d previously suffered from – has fallen sharply and is currently standing at around 1%.

SAVVY TIP: There used to be a big problem with firms turning down claims because they said a customer hadn’t told them about an illness they’d suffered from in the past, with some insurers unashamedly wriggling out of claims. Now, many insurers publish the percentage of claims they pay out, which in itself has increased payout rates.

Where cover varies

The key thing to remember about buying any kind of insurance, but particularly something like critical illness cover, is that insurance companies don’t all have the same approach. It doesn’t just mean that some companies cover more illnesses than others (which I’ve covered in the article Do you need critical illness insurance? What to look for and what to avoid, mentioned earlier) but that different companies will charge the same person very different premiums.

For example:

Some companies will target people in the best of health; this means they’ll offer relatively cheap critical illness insurance to those who haven’t had health problems in the past but will charge those who have had health problems a lot more (called ‘loading’ in the jargon).

  • Some companies won’t charge more if you suffer from certain conditions. High blood pressure and high body mass index are two conditions that insurers take a very different view on. It’s not unusual for clients to be able to save 50% on premiums if they go to the right insurer.

SAVVY TIP: It’s a bit of a cliche to say you should shop around but it’s worth doing. However, it’s also true that the cheapest critical illness policy may not be the best one for you as its cover may be limited.

  • The approach of a company may vary over time. A company may charge people with high blood pressure more for a critical illness policy one year but not the next. This could be because they’ve brought in a new underwriting team (who assess the risks and how much they should charge).
  • Some companies include cover for children. Not all companies include cover for children but claims for the illness of a child are common (the fourth most common reason for a claim, after cancer, heart attack and stroke).

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