In the past few years, there has been a drop in sales of critical illness insurance. The huge 70 percent increase in premiums over the past few years is the main reason. Many people can't afford critical illness insurance because it's so expensive.
It's not that insurance for serious illnesses is a bad idea. After all, it pays out a lump sum if the policyholder is diagnosed with one of the many critical illnesses listed on the policy and lives at least 28 days after the diagnosis.
In the past few years, there has been a drop in sales of critical illness insurance. The huge 70 percent increase in premiums over the past few years is the main reason. Many people can't afford critical illness insurance because it's so expensive.
It's not that insurance for serious illnesses is a bad idea. After all, it pays out a lump sum if the policyholder is diagnosed with one of the many critical illnesses listed on the policy and lives at least 28 days after being diagnosed. (Note that some policies only last for 14 days.) Most policies cover a long list of illnesses, but about 60% of claims are for cancer, which doesn't come as a surprise since 1 in 3 people will get cancer at some point in their lives. When you look at the idea of Critical illness insurance, it's easy to say that everyone who works and makes money should have a policy. Its purpose is to give you money to live on if a serious illness keeps you from working.
Premiums have gone up a lot because medical advances have made it easier and faster to find and treat many diseases that used to kill people. So, insurance companies have been paying out on claims and illnesses that aren't always crippling, which was the point of critical illness insurance in the first place.
Here's a typical list of the kinds of diseases we're talking about to give you a better idea of what we mean:
Alzheimer's Disease
Surgery for aorta graft
Meningitis caused by germs
Blindness
Brain Cancer
Cancer
CJD
Coma
By-pass surgery on the coronary artery
Angioplasty of the coronary artery
Deafness
Heart attack
Heart Valve replacement/repair
Blood transfusions can cause HIV/AIDS
Not being able to do your job properly
Failed kidneys
Leukaemia
Amputations
Loss of words
Major organ transplant
Diseases of motor neurons
Multiple Sclerosis
HIV/AIDS in the workplace
Paralysis
Paraplegia
Parkinson's illness
Stroke
Burns of the third degree
Any disease that leaves a person totally and permanently disabled
Insurance companies have finally figured out that they won't be able to sell policies that people can't or won't pay for and that they can't lower prices on. So, it looks like insurance companies like Scottish Widows are now thinking of a way to make more money by letting people choose which illnesses they want to be covered against. It's a type of "menu pricing," where each illness has its own price and you choose which ones you want to be covered for.
How many people buy this kind of insurance will depend a lot on how much it costs. For example, if about 60% of current claims are for cancer, you would expect the cost of a policy that only covers cancer to be about 40% less than a policy that covers all critical illnesses. We'll have to see what happens.
If you want to know how much a standard critical illness policy would cost, the Internet is the best place to look. Independent discounting brokers who work with all the big insurance companies are the best sites to look out for. These brokers can look at the whole market for you, find the cheapest insurance company, and give you a discount on that company's price. Try to work with a broker who will also give you personal advice over the phone, since different policies cover different things.
