Independent advice on private healthcare
Types of critical illness cover
What the different types of critical illness cover?
The insurance industry can confuse customers and itself with the titles it gives to types of policy within the wider definition of Critical Illness Insurance.
The main variations are listed below, but products do not always fit easily into one definition, so check exactly what they offer. There is an industry move to introduce policies both with narrower definitions to cover only a specific problem such as cancer, or to widen the definition to make Critical Illness policies cover more than the current specified illnesses.
This is a specific critical illness cover for self employed individuals and small firms. It covers the life of one or two key individuals. This is usually the business owner and sometimes their partner (life or business or both) too.
The object is to pay off a business loan or business mortgage should the individual die or get a critical illness.
They are usually life and critical illness, rather than just critical illness policies.
Cancer is a disease caused by normal cells changing so that they grow in an uncontrolled way. The uncontrolled growth causes a lump called a tumour to form. If not treated, the tumour can cause problems.
There are over 200 different types of cancer because there are over 200 different types of body cells. For example, cells that make up the lungs can cause a lung cancer.
Every year in the UK:
- 50,000 women are diagnosed with breast cancer
- 20,000 men are diagnosed with lung cancer
- 2,000 men are diagnosed with testicular cancer
An increasing number of people survive cancer and even recover fully.
There are many cancer treatments - including surgery, radiotherapy, chemotherapy, hormone therapy, bisphosphonates, bone marrow and stem cell transplants, and biological therapies.
Cancer is the most common claim under critical illness.
Special cover just for cancer, is on offer.
Choosing just cancer cover, rather than a full critical illness policy is a gamble and it may not even save you money.
Most cancer covers do not cover all or even most cancers, but a pre-selected small list.
Most critical illness insurance cover providers enable you to extend your plan to also cover your children. Although the cover available ranges between critical illness insurance providers, it is usually a much smaller amount than the main sum insured.
If your child is covered by your critical illness insurance policy and he or she develops an illness covered then you will receive a tax-free lump sum payment. You will receive this payment from your critical illness insurance even if your child gets better. This payment can be spent in any way that you wish, such as on the provision of medical care and treatment for your child.
It is common for the child cover to cover fewer specified diseases than for the adults covered. Some insurers add specific child diseases to child cover; e.g. Bacterial Meningitis. Some insurers delete diseases that are not relevant to children while others see no need to if the children cannot catch them anyway e.g. senile dementia.
Critical Illness insurance pays out a lump sum if you suffer one of a number of specific medical problems, such as a heart attack, cancer or stroke. However, it doesn't pay out for any medical condition, other than those listed.
Critical illness does not pay out for stress, depression or back problems; whereas a full Income Protection policies cover all three. Unlike many, other health and protection insurances, policies pay out on diagnosis of the critical conditions covered, regardless of how well or quickly you recover.
On a Life policy, you have to die before a payout. On a Critical Illness policy, you will get a payout whether you live or die.
Many Critical Illness policies cover total and permanent disability – illnesses and medical conditions where there is no long-term prospect of recovery and where the insured is totally disabled.
A new variant is the offer of disability cover as an option within a wider income protection or critical illness policy. This cover includes illnesses and problems that are not usually covered under Critical Illness. Each insurer varies but a typical offering includes:
- Advanced Cancer
- Cardiovascular System
- Digestive System
- Mental disorders
- Musculoskeletar system
- Permanent failure of functional activity
- Renal Disease
- Respiratory System
Heart attack and stroke
Every year, 150,000 people have a stroke. Most are over 65, but anyone can have a stroke, including children.
A stroke changes lives. It can have a huge effect on you and your family.
A stroke happens when blood cannot get to the brain and brain cells are damaged and die. A stroke happens suddenly and can damage: bodily functions, thought processes, ability to learn, and communication skills.
Some people will experience ongoing problems after their stroke. These problems may be different for each individual, but long-term problems may include difficulties with ongoing tiredness, movement, physical pain, emotional problems, difficulties with speech, memory problems, difficulties swallowing and visual difficulties.
2 out 3 people after a stroke, find their income and ability to earn, reduced.
A stroke is often called heart failure.Heart failure often develops because you have or had a medical condition, such as coronary artery disease, a heart attack or high blood pressure, which has damaged or put extra workload on your heart.
Heart attacks are one of the most common reasons why a person requires emergency medical treatment.
There are over 90,000 heart attacks in England each year.
Most heart attacks occur in people over 45. Men are two to three times more likely to have a heart attack than women.
2 out of 3 people survive a heart attack.
Heart attacks and strokes are the second most common claim under critical illness.
Special cover just for heart attack and stroke is on offer.
Choosing just heart attack and stroke cover, rather than a full critical illness policy is a gamble and it may not even save you money.
This is where there is no treatment in the UK and it is not for UK full time residents. It covers treatment overseas. It is only for UK expatriates living abroad.
Life cover with a critical illness option
This is where a life assurance policy, which pays on death or after a fixed period, offers the option to add a Critical illness policy.
There are hundreds of life policy providers. Many of these are tied to a mortgage or only available from a bank where you have an account. Selecting a Life Policy because of the option it offers on Critical Illness, is as nonsensical as buying a car just because you like the radio or sat-nav system.
Where critical illness is part of or an option to add to a life policy, it is important to understand the two main types of cover:
Fixed term life cover
You pay a fixed, regular amount into a policy that lasts for a period of time decided by you. It pays out a pre-agreed tax-free lump sum if you die (or are diagnosed with a terminal illness).
Mortgage life cover
In return for regular payments, you get a policy that is designed to pay out enough to cover the outstanding balance on the repayment mortgage sum in the event you die (or are diagnosed with a terminal illness). The amount to be paid out reduces in size as you pay back your mortgage.
Life cover with a children's critical illness option
These plans are very similar to Life Insurance Cover with a Critical Illness Option, except that the life cover is only on adults, not children; while the critical illness cover is on children but not adults.
Life cover and critical illness cover combined
This is where a life assurance policy, which pays on death or after a fixed period, also includes the equivalent of a Critical illness policy. There are hundreds of life policy providers. Many of these are tied to a mortgage or only available from a bank where you have an account.
Selecting a Life Policy because of the option it also offers on Critical Illness, is as nonsensical as buying a car just because you like the radio or sat nav system. There is one benefit of combined life and critical illness policies. They can be cheaper than buying the two products separately.
Most of these types of policies, and details about them, are only available from insurance intermediaries, tied agents of insurance companies, banks, building societies, supermarkets and others. In theory, you should be able to see clearly whether or not a provider offers a range of policies from the market, only products from one company, or is a multi tied agent for only a handful of insurers. In practice, this is not always clear.
Life cover with a disability option
This is a combination of Disability cover with a life insurance cover.
These policies only allow you to take out Disability cover if you also buy the Life cover.
Even the best critical illness insurance policy is based on the premise that any assistance and information is secondary to paying out a cash sum. Membership plans turn the conventional wisdom on its head by concentrating on offering assistance and help at all stages.
Plans pay for and arrange the best possible treatment, often overseas. The aim is to increase the chances of survival and recovery after a major life-threatening critical illness. The treatment costs are paid for from an insurance fund.
This is where you do not get treated in the UK, but are sent overseas for treatment, usually to the USA.
Severity based cover
Critical illness cover is based on a list of illnesses and conditions for which insurance payouts will be made.
If you have a listed condition, the chances of beating it or living more than a few months used to be very low.
So, on a conventional cover if you have an insured illness and a claim has been paid, then insurers will no longer offer you cover.
But modern medicine means that many more conditions are beatable, and others can go into remission for years, while even with some diseases, people can live for many years.
An increasing number of insurers recognise that some conditions, such as early stage cancers where the removal of a breast is required, warrant some payout instead of nothing at all.
So one in two policies now automatically includes severity cover, where the payout is directly linked to the severity of the condition. If you have a claim paid, and live for another ten years and a condition worsens or if a new illness is diagnosed, not only does cover continue but also further claims can be made.
The severity concept is literally moving the goalposts. The really important question is changing from 'will my claim be paid?' to 'how much will I be paid?'.
It is now an important part of the cover and you should check if the insurer that perhaps looks good value, does so because another insurer at a slightly higher price also includes severity cover.