Death leaves a heartache no one can heal,
love leaves a memory no one can steal.
Death leaves a heartache no one can heal, love leaves a memory no one can steal.
Critical Illness Insurance
If you become seriously ill, a critical illness policy could pay you a lump sum of money. Critical illness cover is a type of insurance policy that pays out if you get a serious illness, disease or disability. The pay-out can help support you during a life changing situation, by giving you money to use towards your outgoings each month, for example, rent/mortgage and bills. A critical illness policy will not pay out if you die suddenly. However a Critical Illness policy is often combined with life cover under the Policy name ‘life with earlier critical illness’.
ORIGINS
Dr. Marius Barnard, the heart surgeon who was part of the team that performed the first human-to-human heart transplant in South Africa in 1967, was also the person credited for inventing critical illness insurance.
No, an insurance company did not come up with the concept of critical illness insurance. Rather, it was a doctor who saw the financial difficulty of his patients who survived heart surgery. As a heart surgeon, he helped many patients make a full recovery from their illnesses, but at the same time saw them suffer financially in the years to follow.
“I was used to operating on people and boasting about my great results of patients surviving five or six years. But all of sudden I saw the social and financial implications. I knew nothing about insurance but I knew life insurance paid out on the diagnosis of death. But to me, my patients lived for years but in this time they died financially.”
-Dr. Marius Barnard
Dr. Barnard passed away on November 14, 2014. The legacy he leaves behind, critical illness insurance, have helped many people avoid the financial disaster that he frequently witnessed during his practice.
In the early 1900s, people had a life expectancy of around 50 years, and the survival rate from diseases such as influenza and pneumonia was very low. Therefore, life insurance was the only type of insurance that people needed, since a death benefit was nearly a certainty to be paid whenever one suffered an illness. Throughout the 20th century, medical discoveries such as antibiotics and vaccines led to an increase in life expectancy. What was once a fatal illness was now curable. Heart disease, cancer, and stroke became the leading causes of death, although these were now also treatable and in some cases now completely curable. As medicine advanced, more people were able to survive these illnesses, although not always in good health.
Dr. Barnard recognized that his patients, although able to survive a heart disease, were unable to return to work in full capacity. The lingering effects of their illnesses, surgeries, medication and recovery had an enormous impact on their ability to earn an income. Although they had survived, they were overcome with financial hardship. These were people who were breadwinners of the family who had dependents they were no longer able to support. A new type of insurance was then launched called ‘Critical Illness’ Insurance, allowing a tax free benefit to be paid out to the person suffering from the critical illness to be used to however they see fit, e.g. pay off some or all of mortgage, used as income replacement etc. Basically, removing any financial strain that the policy owner suffered, while keeping the focus on the road to recovery.
In 1991, Dr. Barnard brought critical illness insurance to the UK and adapted it to children, which gave them coverage under their parents’ policy. Today, 1 out of 5 claims in the UK are from children, with the majority suffering from leukaemia.
Source: AAFS Insurance
CURRENT PRACTICE
Each Provider in the UK has their own Critical Illness Policy, this meaning each and every Critical Illness Policy is actually different. This is a big factor that not many people know about! The main aim of a good Critical Illness policy would be to pay out to the person insured prior to the illness they are suffering from (and claiming on) becomes debilitating on their life or work. So, ideally if you could have a Critical Illness Policy that pays out at the earliest stages of any illness this is the best.
Another common misconception about Critical Illness Policies is that the policy is automatically ‘better’ if it covers more illnesses. This is not entirely true as when claiming on an illness you must fit into the given criteria or definition of that illness as deemed by that Insurer. So if for example one Insurer states ‘you can get a full pay-out on your policy if you suffer from any type of heart attack’ and another states ‘you can get a full pay-out on your policy if you suffer from a heart attack that is above a certain level of severity’ – both cover heart attack however the former will pay out no matter how severe the heart attack! So, even if the insurer who has the severity level for heart attack covers slightly more illnesses would that mean you should go to them for your policy? Bearing in mind heart attack is one of the biggest Critical Illnesses claimed on in the UK.
Source: ABI Guide to Minimum Standards for Critical Illness Cover
A final element of your Critical Illness Policy to consider (if you already have one) is the year in which you took it out. Every Insurer produces a brand new Critical Illness Policy at least once every 2/4 years (to keep inline with new medical advancements, treatments, diagnostics etc. and life expectancy rates). Each new policy is always better than the last and usually contain significant upgrades for example covering every type of carcinoma in situ. Just being a customer of that Insurer with a current policy will NOT allow you to be automatically upgraded to the better policy so a lot of people end up retaining and paying for an out of date Critical Illness Policy which they are not aware of!
At The Insurance Helpline our knowledge about Critical Illnesses and Insurer’s policies goes beyond just the Illnesses and their definitions, we also have our Wills and Trust Adviser Dr Indira Pole who’s medical knowledge has allowed us to analyse any policy from a Medical Perspective – which is after all the basis of any claim!
CLICK ON THE RELEVANT LOGO BELOW FOR THE MOST RECENT CRITICAL ILLNESS POLICIES FROM THE UK’S MAJOR INSURERS
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CONTACT US
t: 0141 248 9787
e: questions@theinsurancehelpline.org.uk
w: www.theinsurancehelpline.org.uk
WRITE TO US
54a Balshagray Drive
Glasgow
G11 7DA