Critical Illness Cover (CIC) shells out the complete sum insured, which is tax-exempt, if you are identified with a life-threatening medical issue which halts you from working.
Insurers are discovering that while life insurance claims are plumetting, they are having to pay out on more and more claims on CIC schemes. The effect of this is that the cost of Critical Illness cover is becoming a lot more expensive than life plans. If the number of CIC claims go down then consequently the cost of premiums will drop too.
The cost of Direct Line and Swiss Life’s CIC has rocketed by about 20% and 25% respectively. But the likes of Liverpool Victoria and Norwich Union come first in the price rise race with uplifts of up to 65%. Other providers are attempting to charge more for CIC as well as the industry thinks over the meaning of ‘life-threatening medical issue’ and medical science makes big steps in the supervision and control of individual conditions.
The ABI has identified cover for prostate cancer and heart problems, for example. If these illnesses are diagnosed early on they are not then deemed to be ‘life-threatening’, at least for some casualties. Another example is diabetes. At the moment Direct Line is the only insurance provider which still allows this condition on its list of critical ailments covered.
A critical illness cover usually runs for an fixed period, for example equal with the length of time on a house loan, and there is no movement in the regular payments. The premiums are costly for this protection plan. Insurance companies are now seeking to offer reviewable plans where both the ailments covered and the charges paid are looked at again every 5 years, which should cost a good bit less.
Ray Mottershead, senior manager of the independent financial adviser division of Aviva, believes that more individuals will choose the reviewable policies as they become less expensive than the guaranteed cover. That way you get cheap cic insurance protection.
Bradford & Bingley still offers a guaranteed CIC but has put its fees up for that. It has revealed a reviewable policy as a substitute. C&G and HSBC have stopped providing guaranteed CICs.
Reginald Morton, protection director at Legal & General, declares, “The reviewable fee will be typically [around] 16% lower than the guaranteed option.”
A current guaranteed CIC plan cannot be changed to redefine any illnesses which are currently classed as ‘life-threatening’ but which may not be in that category in the future. So if you have this type of policy already and are happy to pay the regular payments you don’t have to be troubled.
If you are aiming to take out a CIC scheme expect to pay less for a reviewable policy. But if you want the extra peace of mind a guaranteed scheme offers, get it fast while there are still some around, and don’t forget you’ll have to pay a little more.
