Deepak Jobanputra examines the question of 100% payouts in severe illness cover, and finds this isn't necessarily to the client's benefit
Not ill enough to claim
Typical critical illness cover adopts a one-size-fits-all approach to covering clients and paying claims. Providers typically cover about 45 conditions. To be eligible for a payout, clients' illnesses must meet very specific criteria.
We've all read about or encountered cases where seemingly cut and dried claims have been refused, as the illness wasn't severe enough, or the client hasn't lost enough limbs to qualify for payment.
This is one of the major downfalls of a typical critical illness cover approach: although it pays 100% of the sum assured, claimants normally have to be very sick to make a claim successfully.
Suffering from any grade of cancer will put an added strain on you, not only physically and emotionally, but financially as a result of attending appointments and treatments, missed days of work, arranging alternative childcare and the added transport and parking costs incurred while attending appointments.
Not only that, but your clients would most likely expect a payout if they're diagnosed with cancer, regardless of what stage it is.
There are products on the market that pay out different percentages of the sum assured based on how severe the illness is.
The unfortunate reality is that 49% of people who have one chronic condition go on to suffer from further illnesses. And if they had already received their full payout, they wouldn’t have access to any more financial protection.
This means that even low-grade cancers, mini strokes and minor heart attacks, which aren't eligible for a payout on a typical critical illness cover policy, will receive an appropriate payout, helping to ensure that any extra costs that arise as a result of treatment and any lost income is covered. And as not all conditions are covered at 100%, these policies usually cover a broader range of illnesses.
Some products on the market cover upwards of 170 conditions, compared with 45 from a typical critical illness cover policy. Research shows that clients are up to 2.5 times more likely to receive a payout (5). So your clients can be safe in the knowledge that they are financially protected and can focus on the most important thing, getting better.
Sources:
1) Swiss Re Term & Health Watch report 2015;
2) Cancer Research UK;
3) The King's Fund;
4) www.ahrq.gov/professionals/prevention-chronic-care/decision/mcc/mccchartbook.pdf;
5) Hannover Re UK Life Branch February 2016.
Deepak Jobanputra is deputy CEO at VitalityLife
Further reading
Insights: How are providers using technology to make advisers' lives easier?
