Premiums for Critical Illness Cover (CIC) are rising as a result of the increasing number of claims and advances in medical research. If you are diagnosed with a life threatening illness, CIC ensures that you will benefit from a tax free lump sum, to carry you through the time that you are unable to work, from a financial point of view.
At least two of the major insurance companies are planning to raise the cost of cover, following other rises by companies such as Friends Provident and BUPA.
The insurance industry is changing as breakthroughs in medical science are helping patients to survive major illnesses, which would have been classed as terminal only a matter of years ago. The result of this change mean that payouts on death are decreasing, but at the same time critical illness cover payouts are rising fast.
For example, in an effort to reduce the rise in premiums, the conditions under which cover can be given for prostate cancer and heart problems has been amended by the Association of British Insurers. The life expectancy in these two conditions has been much improved as a result of early detection programmes.
Currently the exact conditions under which CIC policies pay out are being redrawn, in an effort to reduce the number of claims and slow down the rate of increase of premiums. Conditions such as skin cancer used to be fully covered but have been altered to cover invasive skin cancer only.
According to a spokesman from the broker LifeSearch critical illness policies are currently covering some conditions which are now much easier to detect and treat. This means that claims are being submitted and settles for non-life threatening conditions, which was never the idea of these policies.
CIC is quite likely to be removed from many policies in the future, which will leave only BUPA including this condition.
A product which is increasing being offered is a reviewable policy. Terms regarding illnesses and premiums which are covered by these policies are up for review every five years.
Typically, CIC's are what are classed as guaranteed policies, running for a certain agreed number of years. The premiums remain constant whilst the cover is in place and this is usually for the full term of the mortgage. This type of policy is becoming increasingly more expensive.
According to the Group Director of Liverpool Victoria's independent financial adviser division, you have to pay for the reassurance that a guaranteed policy offers. His thoughts are that people will be increasingly more likely to pick a renewable, rather than guaranteed policy as the increase in cost becomes wider. Some of the main players in the market are giving customers a choice on this matter, whilst others are offering only reviewable cover.
It is understood that Legal and General's reviewable price will cost around 15 per cent less than the guaranteed cover. If you have a guaranteed CIC it cannot be amended to include new definitions of illnesses.
A representative of LifeSearch is of the opinion that although premiums on reviewable policies may be less expensive, customers would prefer to have a guaranteed policy. His thoughts are that if you don't already have cover it would be a wise move to take it out now in advance of further changes.
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