Debunking the Critical Illness Cover myth

Debunking the Critical Illness Cover myth

Do Critical Illness Cover plans pay out when you make a claim?

The media loves a story involving refusal to pay out on insurance claims. Those cases are highlighted to cause a reaction and as a result, the public perception of Critical Illness Cover has been distorted. Fortunately, the media’s portrayal of insurance not paying out is more myth than fact.

In 2016, statistics provided by the Association of British insurers (ABI) showed that a record 15,646 Critical Illness Cover claims were successful last year.

What is Critical Illness Cover?

Critical Illness Cover is an insurance policy which:

  • Pays out a tax-free amount. This is generally a lump sum which is paid out if you are diagnosed with a life-threatening illness, such as cancer, heart attack or stroke
  • Policies last for a specific period, often equal to the length of your mortgage and usually pay out a lump sum which is slightly above the value of your mortgage
  • Can be combined with life insurance in certain cases
  • Covers a set list of severe illnesses, which differs with each policy

The cover’s specific terms and conditions will vary depending on the policy and provider.

What are the true figures?

Insurers paid out in an average of 92.2% of all cases in 2016. Individual examples include:

  • Aviva 92.3%
  • Aegon 95%
  • Vitality life 93%
  • Legal & General 92.6%
  • AIG 92.3%
  • Royal London 92.2%
  • LV= 92%

People perceive insurance policies as not paying out fairly, with data from Aviva showing that as many as 86% of adults believe that insurers purposefully try to void claims. The same research suggests that UK adults believe that insurers only pay out in around 48% of cases.

In reality, less than 10% of claims do not result in a pay-out, for a range of reasons.

Why do some claims fail to pay out?

There are two main reasons for failed insurance claims:

  • Non-disclosure: Where applicants fail to provide accurate information
  • Not meeting criteria: Where claims do not meet the requirements laid out in the policy

Research from Aviva shows that many UK adults are not taking insurance policies seriously, which leads to a refusal to pay out when a claim is made. The research showed that:

  • 53% of policy holders have not read the details of their insurance policy
  • 54% only check the terms and conditions when they need to make a claim
  • 45% do not think that supplying incorrect height and weight data affects their claim
  • 25% do not think that lying about their smoking and alcohol consumption will affect their claim
  • 26% of people have given false general health information, while 31% have not accurately stated their family’s medical history on applications
  • 33% admit to being dishonest in insurance applications

Only 10% of claims fail, and with the figures showing that many of those are a result of applicant and claimant negligence, it is time that the importance and effectiveness of Critical Illness Cover is fully explored.

Improving the success rate

To ensure that your Critical Illness Cover will pay out when you need it to, there are three key steps to take:

Find the right policy: When comparing plans, it is important to look at the details. It can be tempting to choose a policy based on price alone. However, this can backfire if the policy doesn’t cover a wide range of possibilities or has a clause which will mean that you are exempt, should you need to make a claim.

Be honest when applying: Giving false details during your application will affect your right to claim in the future. Whether it is intentional or accidental, inaccurate data, including height and weight, will void the policy and result in your being turned down if you try to make a claim in the future.

If in doubt, mention it: When taking out any type of insurance, especially Critical Illness Cover, it is important to mention any information and circumstances which may affect your ability to claim. If there are doctor’s appointments, tests and diagnoses which you are not sure about mentioning, we advise that you mention it. That way, you cannot be accused of withholding information. Remember, it is better to be turned down for an application now, rather than pay into a plan which will not benefit you.

To discuss your options and find out more about Critical Illness Cover, please call us on the number at the top of this page.

Request a callback

We'd love to hear from you, either call us on 0131 549 9555 or complete the form below