Monthly Archives December 2010

Critical Illness – Did He Say What I Think He Said?

One snowy morning I was slowly gearing myself up to head into the office and I thought I’d catch the news while supping a cuppa.

I was browsing channels for news when I saw Rip Off Britain in the guide.

“Angela Rippon, Gloria Hunniford and Jennie Bond return to their journalistic roots to expose some of the rip offs that are costing British consumers.”

I’ve only ever caught a glimpse of this once before in the past and I flicked onto it again to see what the girls had to say this time.

One section of the show was about a man who had been unable to claim on his Critical Illness Policy because his (severe) arthritis had not left him disabled enough for a valid claim (something called Total & Permanent Disability is usually included with Critical Illness cover).

Some awkward insurers call it Permanent & Total Disability which means the acronym is either TPD or PTD (lets hope Clive Cowdery can bring some uniformity to the industry).

Anyway, the unfortunate policy holder in question did not have a valid TPD claim in the eyes of his insurer.

He wasn’t disabled enough.

Sounds harsh and unfortunate and anyone taking out a Critical Illness policy should be told by their adviser all about the benefits & exclusions of this type of policy.

There’s a chance, given good advice, the poor chap could have had a policy with better ‘definitions’ and the claim could have been paid.

Industry statistics suggest that most UK insurance companies pay out in well over 90% of critical Illness claims so I would still highly recommend it.

I have some (and in 8 months time I’ll have been a non-smoker for 12 months so I’ll replace the cover I have and the price will come down by about 50% – Yes, smoking makes Critical Illness cover cost on average 50% more than for non-smokers).

Back on topic, the man who couldn’t claim decided to keep his policy going so that if his condition worsened he’d be able to claim. The difficulty with this was that he could no longer work and the monthly cost of cover had recently gone up.

Angela Rippon sat down with Nick Kirwin – Assistant Director for Health & Protection Insurance at the ABI (Association of British Insurers – from their website – “The ABI is the voice of the UK’s insurance, investment and long-term savings industry.”)

She asked him why the poor chaps monthly premiums had gone up.

A policy will not increase in price if you develop an illness which the insurance company finds out about unless any changes are made to the policy. The price is set based on underwriting evidence given at the time of applying.

The premiums can go up if a policy is set up as ‘reviewable’ and then passes a 5 or 10 year anniversaries, at which time the cost of cover is recalculated. The age increase of the policy holder and market conditions can mean the cost of cover goes up.

If the policy is linked to an investment, the value of the investment element may decrease so more ‘insurance’ may be needed to make up for this reduction in value.

Rippon then asked Kirwin what people should do if they find the cost of their insurance has suddenly gone up.

And do you know what he said…?

He said, they should think about whether or not they still needed as much cover.

His only suggestion to avoid a price rise was to lower the amount of cover.

I’m sure he had no intention of suggesting people expose themselves to a protection shortfall but he didn’t even mention the risk!

I was shocked!

Sadly for many people it may be the best option if their budget is tight but if this happens, seek the advice of a professional!