Get your CICs out of this (Critical Illness Insurance in general)

Member Name: markysparky

Product:	Critical Illness Insurance in general
Date:	11/07/09 (58 review reads)
Rating:

Advantages: Peace of mind cover, pays out on critical illness

Disadvantages: Can be costly for older lives, smokers and those already medically impaired

I stumbled across this category by chance and couldn't resist writing about it. That might tell you something about the sort of person I am!

History

Critical illness insurance has roots back to South Africa and was introduced into the UK in the late 1980s. It was commonly known as "dread disease" or "serious illness" cover before settling as critical illness cover (CIC).

What is it?

It is a policy of life assurance (a protection or term assurance) which pays out a sum assured on the diagnosis or first suffering of one of a number of medical conditions/disabilities listed in the policy conditions. It can be bought as a standalone product or as a "life or earlier" CIC policy (which will pay out on the first to happen of death or critical illness). Most policies also include a childrens' CIC which will pay out a sum (usually limited to say £20,000) if a policyholder's child, under the age of 18, suffers a CI.

What choices do you have?

The policy can be:
- single or joint life
- one where premiums are guaranteed throughout the fixed policy term
- one where premiums are reviewable (initially after first 5 years of the policy and annually after that)
- include a waiver of premium benefit which pays your premiums when you're incapacitated and unable to work
- on a level cover or decreasing cover (suitable for repayment mortgages) or increasing cover (e.g in line with RPI increase) basis

As a general rule of thumb, you'd be better off going for guaranteed premiums for certainty and one would expect this to be better value in the long run.

What's covered?

Virtually all providers have a pretty consistent set of conditions/disabilities that are included in their CIC offerings.

Most life offices follow the Association of British Insurer's guidelines for conditions that should be included and the full definitions that should appear in the policy conditions. On top of this, some providers have added additional conditions (although these are for rarer conditions which others would include in their definitions for different conditions anyway).

The standard CIC conditions are:
- aortic valve surgery
- aplastic anaemia
- bacterial meningitis
- blindness
- cancer
- cardiomyopathy
- coma
- coronary artery bypass grafts
- Creutzfeldt-Jacob disease
- deafness
- dementia
- encephalitis
- heart attack
- heart valve replacement or repair
- HIV (caught from transfusion, work or asault)
- kidney failure
- liver failure
- loss of speech
- loss of hands of feet
- major organ transplant
- motor neurone disease
- multiple sclerosis
- open heart surgery
- paralysis of limbs
- Parkinson's Disease
- Permanent and total disability before age 60*
- primary pulmonary hypertension
- progressive supra nuclear palsy
- respiratory failure
- stroke
- systemic lupus erythematosus
- third degree burns
- traumatic head injury

* currently under review by the ABI and soon to be replaced

How do I get a policy?

You can buy a CIC policy through an independent financial adviser, direct from a provider or online. Make sure you shop around for the best deal in terms of price. A recent initiative is for cover which is severity-based and doesn't necessarily pay the full sum assured on each claim - one could in effect make a number of smaller claims based on the severity of each incapacity (this lowers the premium you would have to pay and it would be worth investigating if you were working to a very tight budget).

The application form will ask many questions about the appliocant's personal medical history, family history, occupation, habits, pastimes etc, etc. Full underwriting is necessary, which may or may not involve obtaining a GP's report or medical examination).

If terms can be offered, which they can in well over 98% of all applications, they may be on standard rates, rated to a higher premium or come with an exclusion (over 90% would be on standard rates).

What about making a claim?

Circa 90% of all CIC claims are paid by the insurers. About 5%+ just don't meet the criteria detailed in the policy conditions and the others are rejected due to non-disclosure of information (mostly at the application stage). Insurers genuinely work hard to highlight the importance of full disclosure of all information and they generally bend over backwards to meet a claim (even in part if there has been a certain level of non-disclosure).

Conclusion

Many people insure their car (OK that's compulsory) , house, mobile phone, pets and electrical appliances but neglect cover on their own life/health. You need to ask the question, how would I cope financially if I had a heart attack (or other serious illness/disability) and couldn't work for a significant period? CIC is typically good value cover and will give you peace of mind.

Summary: An excellent product.