How to select the best critical illness cover policy

What is Critical Illness Cover?

According to the Association of British Insurers' (ABI) 'Statement of best practice for Critical Illness Cover' Critical illness cover means insurance which pays out on meeting the policy definition of a specified critical illness and where all of the following illnesses are included: -

• Cancer - excluding less advanced cases.
• Heart attack - of specified severity.
• Stroke - resulting in permanent symptoms.

Therefore if you have an insurance policy were the insurance provider pays out a lump sum amount if you suffer any of the above then it is likely to be a critical illness cover policy.

What other critical illnesses are covered?

Many critical illness insurance providers include many more illnesses than the minimum required of Cancer, Heart attack and Stroke in their policies. However the list of critical illnesses varies between provider therefore, if you are unsure which provider offers the most appropriate cover for you then you should seek advice from an independent insurance adviser. However, this article should assist with how to compare providers based on the critical illnesses covered.

The ABI have defined a list of standard definitions called the model critical illnesses, whereby insurance providers must use these definitions if they offer cover of that particular illness. A total of 23 model definitions exist in the ABI's Statement of best practice for critical illness cover. These are: -

1. Alzheimer’s disease [before age x] – resulting in permanent symptoms
2. Aorta graft surgery – for disease
3. Benign brain tumour – resulting in permanent symptoms
4. Blindness – permanent and irreversible
5. Cancer – excluding less advanced cases
6. Coma – resulting in permanent symptoms
7. Coronary artery by – pass grafts-with surgery to divide the breastbone
8. Deafness – permanent and irreversible
9. Heart attack – of specified severity
10. Heart valve replacement or repair – with surgery to divide the breastbone
11. HIV infection – caught [in the UK] from a blood transfusion, a physical assault or at work in an eligible occupation
12. Kidney failure – requiring dialysis
13. Loss of speech – permanent and irreversible
14. Loss of hands or feet – permanent physical severance
15. Major organ transplant
16. Motor neurone disease [before age x] – resulting in permanent symptoms
17. Multiple sclerosis – with persisting symptoms
18. Paralysis of limbs – total and irreversible
19. Parkinson’s dise ase [before age x] – resulting in permanent symptoms
20. Stroke – resulting in permanent symptoms
21. Terminal illness
22. Third degree burns – covering 20% of the body’s surface area
23. Traumatic head injury – resulting in permanent symptoms

When comparing insurance providers critical illness cover policies, you should read their Key Features Documents and check for the list of illnesses covered by the policy against this list, if the provider offers all and more then it is likely to be a comprehensive policy. Where more illnesses are listed there are no further model definitions through ABI therefore the insurer will use their own wording so you should investigate these further. Many insurance providers include 'Total Permanent Disability' as an illness, this illness may be measured by assessing the person's ability to perform certain of the following: -

• The insured person's "own occupation".
• "Suited occupations".
• "Any occupation" whatsoever.
• Number of specified activities – for example, activities of daily living or functional ability tests.

Insurance providers can use one or more of the above definitions for their Total Permanent Disability illness definition.

What other benefits may be included?

Critical illness cover policies include a number of further benefits again these vary by insurance provider. Some of these benefits include: -
Child critical illness cover – an identical or subset list of critical illnesses for the children of the policy owner, provides a payout of typically 25% of the policies sum assured or to a specific capped amount.
Waiver of premium – the insurer will cover payments should the policy owner falls ill and is unable to work. This benefit usually is subject to an additional premium.
Indexation – an option to allow the sum assured to increase each year with inflation this can be by a set percentage or the retail prices index RPI.
Option to increase cover – allows increases to the sum assured amount without further medical evidence subject to a life changing events such as getting married, becoming a parent or moving home.

What you should look out for.

As well as the illness definitions the ABI have also defined model exclusions to be used on policies where they apply. These will appear under the heading 'When will the plan not pay out?' in the policies Key Features Document.

• Alcohol or drug abuse
• Criminal acts
• Flying
• Hazardous sports or pastimes
• HIV/AIDS
• Living abroad
• Self inflicted injury
• Unreasonable failure to follow medical advice
• War and civil commotion

Insurers will use these definitions where they apply and include some of there own exclusions where necessary, a typical exclusion often included is non disclosure of medical facts. You should be comfortable that these exclusions do not put you at risk.

What else

Critical illness policies are often combined with some or all of the following thus providing a full protection plan to suit your requirements: -

• Life cover
• Income protection (or Permanent Health Insurance)