Information On Critical Illness

Today the majority of critical illness insurance policies are issued with the requirement of a medical examination. The expense and unpopularity with critical illness insurance policy­holders of such examinations have led to their being required only when the sum assured is a large one (large, that is, in relation to the average for that class of business for the company concerned) or the policy is on an older life, or both. Non-medical limits currently range from £20,000 - £50,000 sum assured at ages up to 50; over the age of 55, most companies will require a medical unless the sum assured is small.

Where no examination is required, companies may send your doctor a medical questionnaire for completion which goes into rather more detail than the simple questions on the proposal form. So long as this does not throw up anything that the critical illness insurance company’s under­writers regard as questionable, you will be accepted, but if any point arises that the underwriters regard as indicative of significantly worse-than-average health or life expectancy, you will be asked to take a medical examination. In most cases this examination will be performed by a doctor selected by the company, not your own GP. He receives a fee from the company for his report. In some cases the company may allow you to be examined by your own doctor. This con­cession is most often allowed to women, who tend to be more sensitive in such matters.

If the proposer is found to be what the underwriters call an impaired life (that is, someone with less than average life expectancy) then it is important to know the amount of premium they will require on a given critical illness insurance policy. Practices can vary widely, first in regard to the normal acceptable limits for “first-class” lives - some critical illness insurance companies will take on at normal rates those whom other companies would require to pay an extra premium - and secondly in regard to the actual loading of premium required for particular ailments or even disabilities.

Building society interest rates can change rapidly and substantially. In two recent years (1973 and 1976) mortgage rates were hoisted respectively by over one-third and over one-fifth. Those who had stretched themselves financially to meet mortgage commitments found themselves in trouble. Whereas the repayment mortgage has some flexibility in this situation, the endowment mortgage has none. When the interest rate is raised, repayment borrowers usually have the option of extending the term of the mortgage rather than increasing their monthly payment (extending the term, say, from 25 to 30 years reduces the capital element in each repayment). But this option is not available to endowment borrowers. It makes no difference what the term of the loan is because they are paying only interest, and they cannot stop paying their critical illness insurance policy premiums as there would then be no cover for the loan.

Endowment borrowers who find themselves squeezed have only one, unpalatable, course of action, to convert their loan into a repayment mortgage of the same or slightly longer term, which will reduce the monthly payment. Surrender of the critical illness insurance policy will, as we have seen, produce a derisory return. It is worth remembering, therefore, that it is unwise to be fully committed on long-term loans to the maximum you can possibly afford.

Whether the full or low-cost endowment method is used, it is worth thinking about making the policy a joint one. This means that the sum assured is payable upon illness of either husband or wife. The additional premium required is normally less than the cost of a separate term assurance for the wife for the same sum assured.

Almost all insurance companies now have low-cost critical illness insurance schemes on the market. The main competitive thrust to date has involved the reduction in premium rates to make the schemes more competitive as compared with the repay­ment mortgage. Some plans even involve a reduced premium on the critical illness policy for the first few years and a higher one later, with a deferment (or reduction) in the investment benefits.

One popular use of critical illness insurance policies is in connection with private education. The rise in school fees in recent years has marched along with inflation, and few parents can now afford fees for more than one child out of current income. Increasingly, therefore, advance provision through the use of critical illness insurance is made to ensure that funds will be available during the school years. The normal way is for the parents to take out a critical illness insurance policy or series of policies on their own life or lives, taking loans against the surrender value for any fees required in the first 10 years and meeting fees thereafter from the successive maturity values of a series of small policies.

Savings can then be made on very long period for accumulation. The shorter this deferred period, the lower the saving will be, but even over a few years it may still be worthwhile. Making useful provision over a shorter period also necessarily involves a larger annual investment. Over very short periods such as one to four years, critical illness insurance can be of little help, though those with large incomes may still derive some benefit from investing for fees payable later in the child’s life.

Even if private education is not being considered, thought should be given to the costs of a course at university. The parental contribution required from those with more than modest incomes is now substantial. The assessed maintenance contribution can impose a large demand on the parents’ net income. Advance provision through critical illness insurance policies can reduce this burden.

Often a child’s grandparents may be major contributors to a school fee plan, and here capital transfer tax can be a problem. They can use it to fund a series of critical illness insurance policies. If the period until schooling begins is shorter, and critical illness insurance policies cannot be used, then the parents should avoid investing any of their own money on the child’s behalf. Critical illness insurance can be useful for education.

Before you decide to take out critical illness insurance, it is essential to know about various types of policies. Reading a particular critical illness insurance policy will allow you to discover the diseases for which insurance will cover you. It does not stop here. Every illness will have its different stipulation, so being knowledgeable can be of utmost help. Policies as well contain exclusions which are similarly equal in significance to know. Missing such details in your critical illness insurance plan will cause you not to understand your policy. Subsequently, the main problem will arise at the time when you will have to make a claim, where confusions will crop up between you and your insurers.

 As with any other insurance scheme, there are rules to follow when you take out critical illness insurance. Not abiding by certain policy laws can cause your claim to be rejected and you may consequently end up with no benefits at all. What will then be your main worries at that time? While your illness will cause your health to deteriorate, you will tend to think about how your family would cope to make both ends meet. For this reason, it is vital to read and understand the various guidelines found in your critical illness insurance policy. Request expert advice when necessary.

 Paying premiums on time is essential to keep your critical illness insurance scheme alive. Premiums can either be paid monthly or yearly depending upon the agreement you have made with your insurers at first. Missing premium payments can definitely lead to the cessation of your policy, resulting in your losing of precious benefits. Careful planning is therefore a must before you sign on some contract papers provided by an insurance company. Also, deciding upon the amount of cover you need, will enable you to know how much premiums you have to pay every month or year. You need to ensure that you are not overwhelmed with heavy premiums every month due to the choice of a high coverage amount.

If you select earlier critical illness benefit or simply critical illness benefit when you buy critical illness insurance, you can have the opportunity to take the buyback option. The buyback option will allow you to obtain further critical illness insurance should you happen to make a critical illness or TPD claim. In this case, your insurance company will have no other choice than to accept your claim and award you benefits. However, you have to be under the age of 60 to be eligible for the acceptance of a claim.

 In the past if you had claimed for heart attack and now wish to invoke the buyback option, your insurance company will have to perform a number of things. Firstly, your insurers will contact the concerned doctors and medical consultants who had treated you to request details of your medical status. As soon as your insurers receive the proof that 1 year has passed since you had been successfully treated with no signs of reappearance of any heart attack, they will prepare your buyback benefit. This option has to be taken inside 5 years of your claim being accepted by critical illness insurance. Selecting the buyback option with critical illness insurance can be an advantage.

Buy back is also known as reinstatement cover in some polices, different providers call things by different names so it is important to clarify exactly what it is you require from the policy that you choose and you do not mean something different to what is offered to you. Normally buy back or reinstatment covers a number of different illnesses but the list will not be as comprehensive at the original cover. It will normally exclude the illness that you suffered from in the first place to get the claim

Critical illness insurance is a protection plan that is designed to pay out a lump sum if you are diagnosed with one of a number of pre determined critical illnesses. This is often combined with life insurance and can offer the complete protection package.

The main critical illnesses that are paid out are cancer heart attack and stroke. The most popular claim being cancer, this is especially true for females. A close second is heart attack, a heart attck is the most claimed on policy for a male. With stroke being in third place again the most popular for a male. There are also of other critical illnesses covered by the individual plans.

The good polices have 40 critical illnesses covered and the not so ones cover up to 27 conditions. Critical illness polices can be either taken on a guaranteed basis or a reviewable contract. The reviewable ones will have the premiums looked at every 5 years and they could go up down or remain the same. The guaranteed premiums are guaranteed to remain constant throughout their full duration.

Premium protection is an addon to your life insurance plan, it goes by a number of different names with different insurance providers. Premium protection is a more modern way of saying waiver of premium on older traditional life insurance plans.

Premium protection is where you can cover your payments if you were to be off sick from work and were unable to pay your policy premiums. Normally this kicks in after 26 weeks and the plan will start to pay your premiums.

There are a number or different definitions that are applied to your payment protection or waiver of premium option on your life insurance plan. The main and best one is own occupation this would be defined you as unable to complete your occupation in the event of sickness or injury.

The next defintion is any occupation, this is where you were unable to do any job in the event of a accident or illness.

The poorest defintion is called activities of daily living, this is where your would be assessed if you could do 3 or more activities of daily living to justify a claim being paid out. These definitions could be getting from a bed to wheelchair, continence, dressing, mobility, feeding and washing.

So in answert to the original question, yes it was a good idea to add this to your policy, however it is important that you have a look at the small print and make sure you got the best definition for the premum protection. If you have own occupation there is a much higher chance of you getting paid out on this plan than that with activities of daily living.