Q. I intend to purchase some critical illness cover, however I have to admit that I’m finding it difficult to decide which factors are the most important when deciding between all of the policies available.
Also, whilst I have looked at the policies from some of the main providers, how can I find out which other policies are available?
I’d appreciate some guidance!
A. You are right that finding the right critical illness cover is not as easy as it may first appear.
As a reminder, critical illness cover is designed to pay out a sum of money upon diagnosis of a specific condition (eg, heart attack, some forms of cancer, etc).
In fact, finding the right critical illness cover is very much like finding the right income protection policy. Both are complicated by nature so one has to tread very carefully to ensure the right cover and type of policy is purchased.
This is in contrast to purchasing life assurance, which is usually selected by price as proving death is a little easier than a critical illness!
That said, this is a list of some of the factors that you should consider (there are more, but we see these as the main ones):
- choose your cover level wisely. Make sure you are not under or over-insuring yourself (ensuring all main debts are covered as a minimum is usually a wise option)
- obtain guaranteed premiums, if possible. This will mean that the amount you pay will not alter (aside from increasing with inflation if you choose that option) during the policy term regardless of the insurance company’s claims.
If you choose reviewable premiums the amount you pay each month may increase in the future. The first premium review normally takes place after the 5th anniversary of the policy (theoretically, the premium could also reduce).
Note, you will normally pay a slightly higher premium each month at outset for guaranteed premiums.
- Check how many critical illness conditions are covered. Providers split the conditions covered into 2 parts: ABI+ (Association of British Insurers) conditions as well as ‘additional’ conditions.
The ABI+ ones cover many of the main conditions, such as cancer, stroke and heart attack. You will be able to compare the wording between providers and you’ll probably find that many are exactly the same as each provider uses standard wording.
The additional cover will include conditions such as loss of limbs and kidney failure.
There are 11 ABI+ conditions (the majority of the main providers cover at least 6) and up to 34 additional conditions.
- Check the claims record for the provider(s) that you choose, as well as which conditions are claimed for the most. For example, one of the main provider’s claims record in 2010 was:
heart attack, 12%
multiple sclerosis, 4%
As we can see, this accounted for 84% of overall claims, so whilst the additional conditions can provide valuable cover, you may want to ensure that you have comprehensive cover in place for the ABI+ conditions.
So, as you can see there are many factors to take into account when deciding which policy / cover is right for you.
If you do not have the time and inclination to do all the research yourself, then it may be best if you use a specialist financial adviser to help you purchase the right cover.
Notice I say to help you – I’m sure you’ll be able to spot if the adviser is simply trying to sell you a policy (and it goes without saying that you should only speak with an adviser that is able to research all the available products in the marketplace).