Critical Illness Cover (CIC) disburses the total sum insured, which is not taxed, if you are identified with a life-threatening disease which halts you from working.
Insurers are finding that while life protection claims are reducing, they are having to finance more and more claims on CIC plans. The effect of this is that the cost of CIC is becoming a lot more expensive than life cover. If the number of CIC claims dimish then understandably the cost of premiums will fall too.
The cost of Direct Line and Swiss Life’s CIC has rocketed by about 19 and 24 percent respectively. But the likes of Liverpool Victoria and Norwich Union win in the price rise race with increases of up to 65%. Other insurance firms are attempting to charge more for CIC as well as the sector believes over the meaning of ‘life-threatening disease’ and medical science makes great improvements in the management and control of certain conditions.
The Association of British Insurers has identified policies for heart problems and prostate cancer, for example. If these medical issues are discovered early on they are not then deemed to be ‘life-threatening’, at least for some people. Another example is diabetes. Right now Tesco is the only insurance organisation which still allows this condition on its inventory of critical medical issues covered.
A CIC cover option usually is for an agreed term, for example on a par with the length of time on a mortgage, and there is no movement in the premiums. The fees are costly for this protection plan. Insurance firms are now looking to offer reviewable plans where both the ailments covered and the regular payments paid are reviewed every four years, which should be cheaper.
Ray Milkins, senior manager of the independent financial adviser division of Liverpool Victoria, thinks that more people will choose the reviewable cover options as they become better value than the guaranteed plan.
Bradford & Bingley continues to provide a guaranteed CIC but has put its fees up for that. It has introduced a reviewable cover option as another choice. C&G and Skandia have stopped providing guaranteed CICs.
Reginald Morton, protection director at Bradford & Bingley, declares, “The reviewable cost will be normally [around] 15 per cent below the guaranteed option.”
An existing guaranteed CIC scheme cannot be updated to redefine any medical issues which are now identified 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 ok to pay the financial amounts you do not have to be troubled.
If you are deciding to take out a CIC scheme expect to pay a smaller amount for a reviewable cover option. But if you want the extra wellbeing a guaranteed policy gives, get it fast while there are still some available, and don’t forget you’ll have to pay a little more.
