Medical insurance is nursed back to health

Petty exclusions that used to plague buyers of critical illness policies are being overhauled – and not before time – says Chiara Cavaglieri

Critical illness insurance may finally be shaking its poor reputation after the UK's largest insurer Aviva became the latest company to make improvements to its policies. Payout rates are on the up, which should give people more confidence, but you must still tread carefully to get the very best policy for your needs.

Critical illness cover is usually bundled together with a life policy and pays out a single tax-free lump sum if you are diagnosed with one of the conditions specifically defined in the policy. In the past insurers were tight-lipped about their claims statistics, which only fuelled accusations that they were wriggling out of claims too easily. However, the latest figures from the Association of British Insurers (ABI) show payout rates of 98 per cent on life insurance claims, 92 per cent for income protection claims and 91 per cent for critical illness.

Nevertheless, it is still very hard to wade through the definitions of what is and isn't covered. Policies vary in terms of what they cover but also in the definitions that can prevent claims – for example, a stroke that isn't "serious enough" or prostate cancer that isn't sufficiently aggressive.

Fortunately, many insurers have made significant improvements. Last week Aviva announced that new policies will have enhanced definitions of stroke and multiple sclerosis (MS) and additional payments of up to £20,000 for specific cancers and brain conditions that, without treatment, would be critical. If you suffer a stroke or are diagnosed with MS, you will now only need a definite diagnosis based on current symptoms; previously you were required to present continuous symptoms for three months.

Aviva's reforms show how complicated conditions can be. In July, for example, the insurer lowered the threshold for levels of the protein troponin that need to be met for a heart attack to be a valid claim. Aviva has also scrapped a restriction to its terminal illness benefit under which people have been unable to claim if diagnosed with a terminal condition in the last 18 months of their plan

Early-stage diagnosis of cancer has been one of the most contentious issues, and policies only used to cover advanced cancers. However, many insurers have now introduced partial, "severity-based" payouts, such as 25 per cent of the main sum assured for early detection of conditions that could lead to a more severe illness. Robert Morrison, Aviva's chief underwriter, says: "These additional payments mean the customer can receive financial support for conditions that wouldn't qualify for a full payment under the critical illness policy, but are serious enough to warrant some support."

With Aviva, customers can receive up to £20,000 without their cover or the sum assured being affected, so they will be to claim again later if they need to.

A typical life and critical illness policy for a 35-year-old non-smoker costs from £35 per month, according to the specialist broker Drewberry Insurance. However, this is a complicated type of product, so seek independent financial advice before making your choice.

The claims history of any insurer can speak volumes. Alan Lakey, director of the specialist adviser CIExpert, says Scottish Widows managed to sell the most critical illness policies in 2011 despite paying out on only 88 per cent of all claims, compared with over 95 per cent at Skandia Life. "The history should be scrutinised. It won't give you the whole picture but it certainly gives you some clues and Scottish Widows stands out from the crowd: it hasn't updated its policy for five years and really has fallen way behind," he says.

It may seem easier to buy a policy on the high street from your bank, but if that institution is affiliated to just one insurer, it will be pure luck if it turns out to be the right policy for you. The ABI does offer model definitions but a specialist adviser can talk you through specific conditions and restrictions and look at policies that are more likely to work for you in terms of your sex and age. Aviva says 93 per cent of its critical illness claims are made up of five conditions – cancer, heart attack, stroke, MS and benign brain tumour – but other core conditions to look out for include coronary artery bypass and heart valve replacement.

"Total permanent disability" (TPD) is an add-on feature in the insurance that you need to consider. The most comprehensive option is "own occupation" cover, for when sickness or injury mean you won't ever be able to do your own job again. With "any occupation" TPD cover, you would have to be unable to do any job whatsoever, making it harder to claim.

You should also discuss alternatives and complementary protection policies with your adviser. While critical illness pays a lump sum upon diagnosis, income protection pays a tax-free income in the event you cannot work because of factors such as stress, depression or a bad back. In an ideal world, they would complement each other but income protection is usually a priority because it lasts as long as you need it.

"Income protection is arguably a better alternative. It pays a tax-free income until you retire as long as you can't work," says Tom Conner, director of Drewberry. "The key issue here is to check the definition of being unable to work as there is not a list of conditions as there is with critical illness."

With any protection policy, you must never withhold important information about your health. Innocent non-disclosure of minor issues is not relevant, but the insurer will refuse your claim if it turns out that you failed to disclose something that would have led to the premium being increased or an exclusion being applied, such as a bad back.

Suggested Topics
News
Netherlands' goalkeeper Tim Krul fails to make a save from Costa Rica's midfielder Celso Borges during a penalty shoot-out in the quarter-final between Netherlands and Costa Rica during the 2014 FIFA World Cup
newsGoalkeepers suffer from 'gambler’s fallacy' during shoot-outs
News
people
Travel
travel
Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
artCultural relations between Sydney and Melbourne soured by row over milk crate art instillation
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
Adèle Exarchopoulos and Léa Seydoux play teeneage lovers in the French erotic drama 'Blue Is The Warmest Colour' - The survey found four times as many women admitting to same-sex experiences than 20 years ago
arts + entsBlue Is The Warmest Colour, Bojack Horseman and Hobbit on the way
News
Two giraffes pictured on Garsfontein Road, Centurion, South Africa.
i100
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
News
Kenny Ireland, pictured in 2010.
peopleBenidorm, actor was just 68
News
i100
Arts and Entertainment
arts + ents
News
people
News
Morrissey pictured in 2013
people
News
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features playground gun massacre
News
i100
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Training Programme Manager (Learning and Development)-London

    £28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

    1st Line Support Technician / Application Support

    £20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

    Team Secretary - (Client Development/Sales Team) - Wimbledon

    £28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

    Accountant / Assistant Management Accountant

    Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

    Day In a Page

    Dress the Gaza situation up all you like, but the truth hurts

    Robert Fisk on Gaza conflict

    Dress the situation up all you like, but the truth hurts
    Save the tiger: Tiger, tiger burning less brightly as numbers plummet

    Tiger, tiger burning less brightly

    When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
    5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

    In grandfather's footsteps

    5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
    Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

    Martha Stewart has flying robot

    The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
    Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

    Do women cyclists need 'pootling lanes'?

    Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
    A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

    A tale of two presidents

    George W Bush downs his paintbrush to pen father’s life story
    Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

    The dining car makes a comeback

    Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
    Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

    Gallery rage

    How are institutions tackling the discomfort of overcrowding this summer?
    Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

    Eye on the prize

    Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
    Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

    Women's rugby

    Tamara Taylor adds fuel to the ire in quest to land World Cup
    Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

    The day America’s love of backyard tigers led to a horrific bloodbath

    With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
    Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

    How Samuel Beckett became a French Resistance spy

    As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
    We will remember them: relatives still honour those who fought in the Great War

    We will remember them

    Relatives still honour those who fought in the Great War
    Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

    Kodak's last-ditch bid to keep celluloid alive

    Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
    Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

    Acting in video games gets a makeover

    David Crookes meets two of the genre's most popular voices