Summary
Tell the whole truth on your application form. Currently one in four of claims are rejected.

Critical Illness Insurance. Critically important – time to take cover

Critical illness insurance policies are designed to help you cope with the changes which will be necessary should you be diagnosed with a “qualifying medical condition”. Most policies will pay out following a diagnosis of heart disease, cancer, stroke, renal failure, paralysis, major organ transplant and coronary artery bypass surgery as well as a range of other conditions. There is normally a one-off tax free payment which is intended to assist you with costs, typically the need to adapt your home or car or maybe re-train for a different occupation. It's not only the bread-winner that can benefit from this type of cover and you should take account of child care and housekeeping costs which would be involved should Mum be out of action.

Unfortunately, at a time when most people are suffering from the shock of learning that they have been diagnosed with a critical illness, they and their families may learn some additional disturbing news. The insurance industries latest figures show that, on average, around a quarter of all claims are rejected!

As soon as a claim is made, the insurance company will request a huge amount of information from your doctor. It's quite likely that much of this information is not relevant to the illness for which the claim relates. The insurer is using this information to ascertain whether or not the insured has been completely truthful on the original insurance application form.

The reason for this is what the insurers call non-disclosure and if any medical information has been omitted, they can use this as grounds for refusing the claim.

It appears that the non-disclosure may not be related to the critical illness. Claims have been turned down for various reasons, including the case of a woman with breast cancer whose case was rejected because she hadn't listed treatment for depression on the original proposal form.

The rejection rates* are shown as follows:

Despite the insurers claim that these rejections are perfectly legal, the Law Commission appears to think differently. There has been a consultation document published recently and the Commission makes the statement “It is possible for an applicant to act reasonably and honestly and yet still fail to meet the duty of disclosure.” The conclusions of these consultations will be reported on as soon as they are available.

It is therefore extremely important that when applying for this very valuable form of insurance, you disclose all previous illnesses. It's probable that if you have to claim, then your medical records will be thoroughly examined and if the insurers consider you omitted medical information, they may “throw out” the request.

Compare companies for the best rates. Read the small print. Spend some considerable time in listing medical conditions. Relax – it may never happen.

* Details sourced from the Daily Mail 07/05

Readers please note : You should undertake your own background checks before taking any action on any aspect mentioned in this article. Where the author has mentioned specific product details or given examples of how companies have reacted to specific situations, these should be correct as far as the author is aware when this article was written. In some cases additional background information not mentioned in the article has been used in obtaining the examples. Some examples or quotes may have been taken from information available in the public domain where all the background details may not be available. Insurers do change policy conditions and underwriting approach. They will view each situation on its own merits.

You should be aware that details of the topics written about within the articles can change. Therefore, always check out the current position before taking any action. You should also check that any action you are considering, or any proposed purchase, is suitable for your personal circumstances.