Author : Michael challiner

Premiums for Critical Illness Cover (CIC) are escalating due to the rising number of claims and concern about medical advances in the future Once diagnosed with a life threatening illness, CIC pays you a tax free lump sum, which will support you financially if you are off work due to illness

Two major insurance companies will be increasing the cost of cover shortly Legal and General's premium will increase by 20 to 25 per cent and that of Swiss Life by 20 per cent These increases are small when compared with the 50 per cent imposed by Friends Provident and BUPA and the 60 per cent announced by Norwich Union and Scottish Equitable Liverpool Victoria are still considering what increase they will impose next month

The insurance industry is in turmoil as advances in medical science help patients to survive illnesses, which would have been terminal only 10 years ago The effect of this sea change in medical insurance is that life insurance claims are decreasing whilst pay outs on critical illness policies have seen a sharp rise Consequently the cost of life cover is dropping, whilst that of critical illness cover is rising rapidly

In an attempt to reduce the sharp rise in premiums, the Association of British Insurers has amended the conditions under which cover is provided for prostrate cancer and heart problems

Many sufferers are now finding that early detection of these conditions results in longer life expectancy The conditions under which CIC policies pay out are being redefined This development will help to reduce the number of claims and consequently slow down the rate at which premiums are increasing (For example, critical illness cover will not pay out for skin cancer unless it is invasive)

Kevin Carr of broker's LifeSearch says that critical illness policies currently cover conditions, which are easier to detect and treat Claims are therefore being settled for non-life threatening conditions, which is not the purpose of the policy
A review of the terms of many policies is likely in the future CIC for diabetes is being removed by Swiss Life, which leaves BUPA as the only insurer that includes this condition

Reviewable policies are now being offered by an increasing number of insurers Illnesses and premiums covered by these policies are reviewed every five years A typical CIC is a guaranteed policy, which runs for a stipulated number of years The premiums stay the same whilst the cover is in force, which is normally the term of their mortgage However this type of cover is becoming more costly

The Group Director of Liverpool Victoria's independent financial adviser division, Rye Mills says that you have to pay for the reassurance that a guaranteed policy offers He adds that people are more likely to choose a renewable rather than guaranteed policy as the increase in cost widens Whilst Legal and General increases it's CIC it is also launching a reviewable policy thus giving customers a choice Skandia has withdrawn it's guaranteed CIC, whereas Scottish Widows is only offering reviewable cover

It is understood that Legal and General's reviewable price will be about 15% lower than the guaranteed cover If you have a guaranteed CIC it cannot be amended to include new definitions of illnesses

Mr Carr from LifeSearch believes that although premiums on reviewable policies maybe cheaper customers would rather have a guaranteed policy He suggests that if you don't already have cover it would be prudent to take it out now before any further changes are announced

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