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We have talked about the importance of critical illness cover in protecting your family against the possible consequences of contracting a serious illness in previous blog posts. Medical advances have led to earlier diagnosis of critical illnesses such as cancer and heart disease which in turn have raised survival rates. That is clearly great news but it does make it even more vital to protect yourself and your family against such a diagnosis.
According to a Legal and General survey, an average household in the UK has enough savings to survive for just 18 days should the main breadwinner become unable to work for any reason. After that time, families are entirely dependent on handouts from the state, friends and family to survive. Imagine the stress of that, added on to the pressure of someone in the family being seriously ill and you have a nightmare situation to contend with.
A lump sum pay-out from a critical illness policy can prove to be a lifeline for families if a policyholder is unable to work, eliminating that stress, saving you from having to go cap in hand to find money to cover the mortgage and general living expenses and enabling you to put all your energies into recovery. It could also pay for any treatment that you need which may not be provided by the state.
In the past, critical illness cover has garnered some criticism due to the number of rejected claims but the industry has cleaned up its act and pay-out rates have been increasing in recent years. Figures from the Association of British Insurers claim that in 2012 over 11,700 people received an average of £70,000 from critical illness policies with daily pay-outs totalling £2.2mn. Overall, 91% of critical illness claims were paid. To avoid being one of the 9% of rejected claims, there are two really important things to note:
All policies cover the big three of cancer, heart attack and stroke but the other conditions covered will vary from policy to policy and will also affect the cost of cover. The ideal is for your policy to cover you for as broad a range of conditions as possible – the best policies list up to 50 illnesses and conditions.
In recent years there has been a move in the industry towards ‘severity-based’ cover. This is where the proportion of the pay-out received by a policyholder is linked to how severe their diagnosis is. This is particularly relevant to the most common cancers in women and men, namely breast cancer and prostate cancer, where the impact on someone’s life and ability to work is significantly less than if they were to suffer a severe stroke for example.
The biggest reason why claims are rejected is a failure to disclose relevant medical history when a critical illness policy is taken out. It is vital to be honest about your situation and ensure that all previous medical complaints and recommendations by doctors are noted. For example, if your doctor has recommended that you cut down the amount of alcohol you drink, that is relevant.
The family of Nic Hughes are unfortunate to have learned the hard way about being meticulous about disclosure. Nic’s failure to declare two pieces of information meant that he lost his fight against gall bladder cancer before a dispute over payment under his critical illness policy was resolved. His family did eventually win but only after a hugely stressful battle. Even if you think something is entirely irrelevant it is advisable to include it.
Given the importance of getting your critical illness policy right, it is always advisable to seek the advice of a professional who can help you compare cover from a range of different providers and select the best policy at the best price for you.
Would you like to be better informed about critical illness policies before making a purchase decision? Get in touch with us and have all your questions answered.
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