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
Russell Brand was in typically combative form during his promotional interview with Newsnight's Evan Davis
peopleReports that Brand could stand for Mayor on an 'anti-politics' ticket
News
The clocks go forward an hour at 1am on Sunday 30 March
news
Arts and Entertainment
The Doctor finds himself in a forest version of London in Doctor Who episode 'In the Forest of the Night'
TVReview: Is the Doctor ever going stop frowning? Apparently not.
News
Voluminous silk drawers were worn by Queen Victoria
newsThe silk underwear is part of a growing trade in celebrity smalls
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Sport
footballMatch report: Real fight back to ruin Argentinian's debut
News
Candidates with surnames that start with an A have an electoral advantage
newsVoters are biased towards names with letters near start of alphabet
Arts and Entertainment
Isis with Lord Grantham (Hugh Bonneville)
TV
Arts and Entertainment
Jay James
TVReview: Performances were stale and cheesier than a chunk of Blue Stilton left out for a month
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

    Compensation and Benefits Manager - Brentwood - Circa £60,000

    £60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

    Data Analyst/Planning and Performance – Surrey – Up to £35k

    £30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?