I'm afraid we've taken you off the critical list

Specialist health policies may not protect against some serious illnesses.

Pressured by growing uncertainties about work, health and life generally, many more people are buying insurance policies specifically to cover them against contracting a "critical illness". Five years ago, less than 200,000 of these policies were in existence; now there are nearly 1 million.

Legal and General reports that since it recently cut the cost of life cover by 25 per cent, it has found many of its policy-holders, rather than pocketing the difference, are reinvesting the saving in critical illness cover. Others are buying this cover willy-nilly as part of their compulsory mortgage protection package.

For those buying this kind of cover, however, here are some words of warning: more than one in five critical illness insurance claims are rejected.

As the insurance industry gears up to sell even more cover against life- threatening conditions, not least as part of a mortgage protection packages, many claimants are destined to be disappointed.

The moral is, read the small print before you buy and make sure what illnesses are covered, and that are not. Are you covered not just for cancer, heart attacks and strokes, but for Aids or CJD, for example? And make sure you disclose the full truth, or your policy could be useless.

A survey by Employers Reassurance International, which reinsures most of the major household names including Abbey Life, General Accident, Legal and General and Norwich Union, shows that 75 per cent of claims made for permanent and total disability are disallowed. Over half of those that claim because they are paralysed are denied, nearly half of those claiming for renal failure don't get paid and a quarter of those who claim for a heart attacks, strokes or multiple sclerosis are denied their claim.

While cancer claims make up half of all critical illness claims, however, only 11 per cent are denied.

The most important single reason for not paying out on a claim is failure to disclose either an existing condition or related illness at the time the policy was taken out.

Over half are denied because of misdiagnosis which includes everything from frivolous claims where a man with a broken leg claims for permanent disability, to those who claim for benign tumours when only malignant cancers are covered. There are also the downright fraudulent claims. As the report states: "Our own experience suggests that the temptation of submitting fraudulent claims remains higher than for other life products."

For the insurance industry, there is the worrying fact that over 10 per cent of all claims come within three months of the policy coming into effect.

Phil Cleverley, underwriting manager with Employers Re, says: "Our research shows that one-third of claims are made within a year of taking out a critical illness policy - which shows that there is what we call in the industry some anti-selection going on against the insurance companies involved. Some people just take the attitude that they should try their luck, that they have nothing to lose.

"We are advising the companies we reinsure to be very careful about these policies. Of course, there are also many who do not understand the small print of these policies, the exclusions and the very tight definitions."

One of the most contentious areas is permanent and total disability. While most feel that if they can no longer do their job then they should be able to claim, many policies state that if the claimant can do any job, they are disqualified. Employers Re, which does rolling research into critical illness claims, feels that there has been very little difference over the past 12 months in the percentage of these claims being denied.

Grant Barron, personal market manager with Norwich Union says: "There is a lot of confusion about what is permanent and total disability. We have one on at the moment where someone who has developed a cataract in one eye, which can be easily operated on, is claiming for total loss of sight. A quarter of the claims we get go no further than our replying and spelling out what is or isn't covered.

"We are here to pay out, and the public will never get unless it asks. This a very new market and these misunderstandings are very much an early- days problem."

In fact, many feel that the high level of rejected claims are just part of the teething process of a growing market and, as insurance companies make their wording clearer and the general public understands better what life-threatening cover is all about, so the number of claims declined will go down. While losing a kidney is very serious, it doesn't stop the individual living and working his or her normal life span. Angina may be heart-related, but it is not the same as a life-diminishing heart attack.

Abbey Life, which leads the market in critical illness policies, has paid out pounds 28m in claims, two-thirds of the industry total. Its figures show that 86 per cent of the claims paid come from heart attacks, cancer and strokes. A typical pay-out was for a computer operator who developed testicular cancer. Although he has since recovered, his benefit was pounds 53,537. A female aged 33 suffering from malignant melanoma cancer, although now fully recovered, received pounds 54,000.

Each year, 250,000 are diagnosed as having cancer, 300,000 have a heart attack and 100,000 suffer a stroke. Small wonder then that demand for this kind of cover is on the increase.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Life and Style
Fans line up at the AVNs, straining to capture a photo of their favourite star
life Tim Walker asks how much longer it can flesh out an existence
Life and Style
Every minute of every day, Twitter is awash with anger as we seek to let these organisations know precisely what we think of them
techWhen it comes to vitriol, no one on attracts our ire more than big businesses offering bad service
News
Professor David Nutt wants to change the way gravely ill patients are treated in Britain
people Why does a former Government tsar believe that mind-altering drugs have a place on prescription?
News
Norway’s ‘The Nordland Line – Minute by Minute, Season by Season’ continues the trend of slow TV
television
Arts and Entertainment
art
Sport
Jonny Evans has pleaded not guilty to an FA charge for spitting at Papiss Cisse
football
Life and Style
Kate Moss will make a cameo appearance in David Walliams' The Boy in the Dress
fashion
News
The image released by the Salvation Army, using 'The Dress'
news
Sport
Liverpool defender Kolo Toure
football Defender could make history in the FA Cup, but African Cup of Nations win means he's already content
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

    Recruitment Genius: Customer Relations Officer

    £13000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Jemma Gent: Project Coordinator

    £12 - £15 Hourly Rate: Jemma Gent: In this role you will report to the Head of...

    Recruitment Genius: Evening Administrator

    £8 per hour: Recruitment Genius: This Pension Specialist was established early...

    Day In a Page

    Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

    Homeless Veterans campaign

    Donations hit record-breaking £1m target after huge gift from Lloyds Bank
    Flight MH370 a year on: Lost without a trace – but the search goes on

    Lost without a trace

    But, a year on, the search continues for Flight MH370
    Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

    Germany's spy HQ springs a leak

    Thieves break into new €1.5bn complex... to steal taps
    International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

    Whirlwind wit of Simone de Beauvoir

    Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
    Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

    Confessions of a planespotter

    With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
    Russia's gulag museum 'makes no mention' of Stalin's atrocities

    Russia's gulag museum

    Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
    The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

    The big fresh food con

    Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
    Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

    Virginia Ironside was my landlady

    Tim Willis reveals what it's like to live with an agony aunt on call 24/7
    Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

    Paris Fashion Week 2015

    The wit and wisdom of Manish Arora's exercise in high camp
    8 best workout DVDs

    8 best workout DVDs

    If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
    Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

    Paul Scholes column

    I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
    Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

    From the Azteca to Vicarage Road with a million followers

    Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
    Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

    Khan ready to meet winner of Mayweather v Pacquiao

    The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
    War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

    Baghdad fights to win back Tikrit from Isis – but then what?

    Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable