Insurers take a kinder line in covering the ill

MOST life assurance schemes operated by employers and some of the larger health-related insurance schemes pool risk on a group basis and do not require members to complete medical questionnaires. Everyone on cover is therefore treated equally, regardless of their state of health.

Anyone in poor health and looking for individual cover may not be so lucky. Providers of life assurance and health-related covers cannot afford to be too sympathetic. They often impose special terms for those with dodgy medical histories, usually known as non-standard applicants, because they know there is a greater than average chance that they will make a claim.

It is, however, rare for someone with a poor health record to be turned down altogether. For term assurance, straightforward life cover that pays out a lump sum if death occurs within a stated time period, this happens to less than half a per cent of all applicants.

A further 5 per cent of term assurance applicants are, however, charged an additional premium. This could be anything from half as much again to four times as much, depending on factors such as the age of the individual, the severity of the condition and the length of the policy term.

With permanent health insurance (PHI), which pays a regular income in the event of long-term illness or disability, the extra charge is as high as 15 per cent. This is because conditions such as bad backs and stress- related illnesses are capable of causing incapacity without necessarily being life threatening. In many cases, however, PHI insurers exclude problem conditions from cover rather than impose premium loadings.

Anyone who has been tarnished with the non-standard brush has to declare the fact on all future applications for similar cover. Trying to pull the wool over the eyes of insurers simply isn't an option as all such information is accessible to underwriters via a centralised industry-wide database.

Penny O'Nions, a specialist intermediary, says: "Insurance is a form of gambling and if you don't allow the insurance company to feed in all the relevant information it is unlikely to be able to give you suitable odds on your risk.

"If they don't pick you up at the beginning they will at the end and you will find you've been paying many years of premiums for nothing because you won't get a payout. You may even find the insurer sues you for fraud or brings criminal proceedings against you."

Non-standard health risks can, however, draw some consolation from the fact that medical advances and more sophisticated underwriting data now enable insurers to treat them more favourably than ever before.

These days, standard terms for both life and PHI cover are often granted to those with mild forms of asthma and epilepsy and to former anorexics who have regained normal weight for a couple of years.

Broadly speaking, the more time that has elapsed since a condition occurred, the more leniently you are likely to be treated. Even those who have made complete recoveries from cancer may be accepted at standard rates for life assurance after 10 years, or within five years for some of the milder forms of cancer.

A heart attack is the one common condition that underwriters do not feel can be made irrelevant by time. Anybody who has had one will almost certainly continue to receive at least some loading, however long ago it occurred.

Using a specialist intermediary to select the best deal available is far less time consuming than shopping around between insurers and does not normally cost more. Most intermediaries are paid entirely by commission on the policies they recommend and make no direct charge to the client, even if they are unable to find a suitable policy.

Such specialists know which companies are likely to be most competitive for any particular condition and have considerable experience liaising with underwriters.

By presenting cases in a sympathetic manner they are often able to secure better terms than a client could by approaching an insurer directly.

The specialists achieve remarkably high success rates. John Joseph Financial Services, for example, claims to find some sort of cover for 98 per cent of non-standard applicants.

No specialist will be able to find cover for those who have been diagnosed as suffering from a terminal illness. They may, on the other hand, be able to help make the dying process more comfortable by securing policy holders reduced payouts on life policies before death actually occurs.

Most travel insurance policies exclude serious pre-existing conditions but Inter Assurance's MediCover, launched in January, covers just about everything except a terminal prognosis.

Prospective MediCover clients answer a series of questions over the phone and rates are established accordingly. These are not always prohibitively expensive. Someone with serious diabetes going to Spain for two weeks, for example, can be covered for pounds 80, twice the standard premium.

Some conditions can, on the other hand, be loaded so steeply that policy holders might be tempted to risk having an exclusion instead. Someone with serious hypertension holidaying in Spain for two weeks would be charged pounds 270.

q Specialist Intermediaries: Penny O'Nions, 01494 726688; MML Financial Services, 01275 810445; John Joseph Financial Services, 0171-486 3486; Falcon Group, 0117 929 1012; Richmond Financial Management, 01242 260600; Inter Assurance, 01252 747765.