A man has a 1 in 5 chance of getting a serious long-term illness before he would normally retire. So why don't more people have critical illness insurance? This article looks at the reasons for this type of insurance and stresses how important it is.
GREAT NEWS! Now, one in five people will win the lottery before they retire.
Are you excited? Think it's only a matter of time before you win? Think again, because it won't happen, but at least it made you think!
Now think about the same odds, but this time about bad news. Men have a 1 in 5 chance and women have a 1 in 6 chance of not being able to work because of a long-term critical illness. This time, you're wrong.
Insurance can't change those odds, but it can help protect your finances if you get sick and can't work for a long time but still have to take care of your family and home.
Convention says that every man who is a good father and husband should have life insurance. It's easy to understand, everyone agrees with it, and your next-door neighbour also has it. But what about its close relative, insurance for critical illness? To find someone who has it, you'll have to walk down a few streets. Why, given the odds? After all, it gives out a lump sum that isn't taxed as soon as an insured critical illness is found.
Cost is usually given as a reason. Yes, it costs more than life insurance, but that's because it covers a bigger risk. You are much more likely to get a serious illness than to die before you are supposed to retire. In fact, 47 is the average age of a claim. So, it's clear that the public's resistance has a lot more to do with it.
Not knowing the risks or having "head in the sand syndrome" are two big ones. After all, we don't like to think about Alzheimer's disease, bacterial meningitis, brain tumours, leukaemia, and the long list of other illnesses that are usually covered by critical illness insurance.
Is there a different reason? Well, there have been many newspaper articles about people who make a claim on their critical illness policy only to have it denied on what seems to be a technicality. The implication is that you can't trust the insurance company. In fact, Standard Life admits openly that it denies about 20% of critical illness claims.
The truth is that behind every story of being turned down is a terrible story of illness, pain, or sadness that could be used as a story by a journalist. But that alone is not proof that the insurance company is acting dishonestly.
Insurance companies do make mistakes, but most of the time, the claim was never valid to begin with. There are mainly two reasons. First of all, the policyholder is making a claim for an illness that is not listed as a critical illness in the policy. Even though it's a shame, if the illness isn't on the list, it's not covered by the policy, and the policy won't pay out.
The lesson is that you should look closely at the illnesses covered by each insurance company and buy the one that covers the most illnesses. If you don't, the laws of chance will win......
The second main reason for being turned down is that all important information wasn't included on the original application form. For example, if the applicant doesn't tell the insurance company that his father died of a heart attack when he was 50 or that he's getting tests for headaches, the insurance company will make the wrong decision about the risks it's being asked to cover. If the insurance company had known about this extra information, it could have raised the premium, asked the applicant to get a medical exam, waited for the results of tests, or even refused to cover the person. By not telling, the applicant has gotten insurance based on false information or at least wrong information.
This is the second lesson. On your application form, you should always tell the truth and the whole truth. Anything that might be even slightly related to your medical condition must be told.
All of this shows that you need help from an insurance professional. Critical illness policies can be different, and it can take a trained eye to figure out which one is best for you and your budget. This doesn't mean you have to miss out on the cheaper premiums you can get online, but make sure you talk it over with one of their phone-based advisers and read the list of illnesses for which you can make a claim when it comes in the mail.
Then you can relax knowing you've taken another important step to protect your family's finances. Let's all hope you're one of the majority of people who don't want to claim.
Now is the time to focus on having fun in life.
