Critical Illness Insurance Do you really need it? Or is it a waste of time?

Summary: There is a 1 in 5 chance that a man will suffer a long-term critical illness before his normal retirement age. So why isn't critical illness insurance more popular? This article investigates the reasons and reinforces the importance of this form of insurance.

GREAT NEWS! There's now a one in five chance of you winning the lottery before you retire. Getting excited? Think it's just a matter of time before you win? Think again, it's not going to happen - but it got you thinking! Now think of the same odds but this time about bad news. There is a 1 in 5 chance for men and a 1 in 6 chance for women that a long-term critical illness will prevent them from working. Sorry - this time it's true. Insurance cannot change those odds but it can alleviate the potential financial wreckage caused by being unable to work through long-term illness and still having a family and home to support. Convention declares that every good family man should have life insurance. It's easily understood, it's accepted and your next door neighbour has it too. But what about it's close cousin critical illness insurance? You'll have to walk several streets to find someone who has it. Given the odds, why? After all it pays out a tax-free lump sum immediately an insured critical illness is diagnosed. The usual reason given is its expense. Yes it is more expensive than life insurance but after all it's providing cover for a greater risk. You're much more likely to experience a critical illness than die before your normal retirement age. Indeed, the average age for a claim is 47. So clearly there is much more to the public's resistance. Not understanding the risks or "head in the sand syndrome" are certainly major factors. After all a lzheimer's disease, bacterial meningitis, brain tumours and leukaemia plus the long list of other illnesses typically covered by critical illness insurance, are not matters we care to think of nor know much about. Could there be another reason? Well there have been repeated newspaper articles about people who claim on their critical illness policy only to have it turned down on an apparent technicality - the inference being that the insurance company cannot be trusted. Indeed, Standard Life freely admits that it turns down around 20 % of critical illness claims. The truth is that behind every story of rejection there's a harrowing story of illness, distress and sorrow - and potential copy for the journalist. But that in itself, is not evidence that the insurance company is guilty of devious behaviour. Yes insurance companies do make mistakes, but more often than not the claim was invalid from the outset. There are two main causes. Firstly, the policyholder is claiming for an illness that is not one of the critical illnesses scheduled in the policy documentation. Regrettable, but it's a fact that if the illness is not listed it isn't insured and the policy won't pay out. The moral is to closely compare the illnesses covered by competing insurance companies and buy the one with the most extensive coverage of illnesses. If you don't, sods law will prevail