Critical criticism

Critical illness insurance is designed to pay out a lump sum if you are unfortunate enough to be diagnosed with one of a list of medical conditions specified in the policy documents.

There is a wide variation in the length of the lists, some covering as few as eight illnesses and one a staggering 140, but this is a slightly different version, which pays various sums, according to the severity of the condition. Heart disease and cancer head the list on all the policies. Very few policies will cover illness caused by stress or mental problems. Back problems are rarely covered either.

Whilst some people consider critical illness cover essential and enjoy the peace of mind being insured offers them, it is interesting to note that a great many claims are turned down. It is believed that this figure is 20%. The most common reason for this being non-disclosure of a previous illness. Insurance companies are quite entitled to do this and the first thing that will happen, in the event of a claim, is that the insurance company will ask for your full health records. They will go through these very thoroughly and if they find any proof of failure to tell them about a previous illness or condition, whether or not you consider it to be relevant to the current condition, they can legally refuse to pay out on the claim. The law states, quite clearly, that if a customer has failed to disclose information sought by the insurer, the provider is entitled to scrap the cover.

What this means, in effect, is that if you fail to tell the insurers, at the time of making the application for critical illness cover, of even minor ailments, then the whole policy will not be worth the paper it’s written on.

This appears to be an impossible situation. Minor illnesses, long forgotten, may come back to haunt you. For the Mums’ out there – can you remember the “oddities” of your pregnancy? Your blood pressure may have been raised; you may have suffered the usual morning sickness, backache and what is known as “gestational diabetes”. This is quite common. Most cases don’t even need treatment and clear up, never to return. Years later you may decide to take out some critical illness cover. Do you even remember the pregnancy problems, let alone imagine they could make a difference to an unrelated illness? Yet this failure to disclose could be the reason for an insurer refusing to pay out on a later, unrelated, critical illness.

How many times do you come out of the Doctor’s surgery clutching some pills, unsure of the actual name the doctor gave to the condition for which you’re now being treated? It will be there, on your records, but years later and with the condition long cleared up, who can honestly say that they remember, and record, every minor illness.

In the event of a dispute regarding non-disclosure, if the Financial Ombudsman Service gets involved, they will try to establish whether the consumer told deliberate lies or whether they had omitted details because, for example, the questions on the proposal form were poorly worded.

One way in which the situation could be improved would be by insurers carrying out more detailed investigations prior to issuing cover or if they were to agree not to scour medical records if a claim is made after an agreed and reasonable period.

If you’re considering taking out critical illness insurance, it is obviously very important to read the policy very carefully and make sure you tell the truth, the whole truth and nothing but the truth. Only make the final decision to go ahead when you’re sure you’re totally confident regarding your choice of insurer.

An on-line broker will be able to offer you a choice of policies and lots of advice. There are some special internet discounts, too.