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An Innovative Approach To Critical Illness Cover

The word ‘innovative’ can rarely be used when addressing the issue of financial planning. However, we believe that it can rightly be applied to a recent product launch in the critical illness market.

Since the introduction of critical illness provision, which originated as ‘dread disease’ cover from South Africa in the 1980’s, the market has evolved. One of the biggest changes as the market developed was the significant increase in premiums for such cover, as the industry came to terms with claims experience and its morbidity costs were more accurately understood. Furthermore, definitions of conditions covered have become more stringent as advances in medical science and treatment have improved. However, with one or two exceptions, what has largely remained unaltered is the range of illnesses, with good quality plans covering typically 25 to 30 conditions.

A recent innovation has not only seen the launch of an entirely new product but has also given rise to a totally new approach to the critical illness insurance market. The plan does not just provide protection against the usual 25 to 30 ailments that one would expect to see. In total, the plan provides cover of in excess of 150 conditions. In addition, in recognition that not all illnesses or disorders have the same impact on an individual’s personal and financial well-being, the plan provides partial payouts of the sum insured upon the diagnosis of some conditions to reflect more accurately the financial effect of suffering that condition. Furthermore, in regard to some disorders, payouts may be graduated to reflect the severity of that condition. This avoids the all or nothing approach often adopted by other insurers, which can often result in declined claims because the condition is not ‘severe enough’.

Coupled with other features of the policy, these result in a policy that may provide multiple payouts rather than one, ensuring that critical illness remains in place after a claim. This can be considered to be an important feature, as it does not preclude you from claiming on future illnesses. As a consequence of this approach, total payouts can be as high as 3 times the initial sum insured.

Like other policies, the plan can also be written so that life cover is separate from the critical illness provision. This is a useful feature as when suffering a critical illness, it can often leave an individual uninsurable for life cover.

Whilst the premise of the plan is to provide protection against the effects of critical illness, the objective of the insurer is to encourage a healthier lifestyle. Indeed, financial incentives are offered in the form of discounts on gym memberships, health screenings, etc. In turn the adoption of a healthier existence may actually result in premium savings.

Where an property investors are considering effecting critical illness cover, perhaps in conjunction with a mortgage or development finance, or indeed are reviewing their existing provision, it is well worth considering this innovative approach to this insurance. If you would like to discuss this in further detail, please feel free to contact Jeff Crewdson, Steve Prosser or Chris Raggett to discuss your requirements more fully.

Date of Article: 11th June 2009

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This domain is owned by Warr & Co Chartered Accountants which is a member of the Institute of Chartered Accountants in England & Wales (ICAEW). Whilst the information detailed here is updated regularly to ensure it remains factually correct, it does not in any way constitute specific advice and no responsibility shall be accepted for any actions taken directly as a consequence of reading it. If you would like to discuss any of the points raised and / or engage our services in providing advice specific to your personal circumstances, please feel free to contact Peter Edwards on 0161 477 6789 or email us at