The way insurers deal with this is to have a ‘waiting period’ written in to the policy, which is typically around 21 days. If the policyholder passes away during this time it’s a death claim, and if not it is a potential CI claim.
If someone has stand alone CI and dies within a week or two of suffering a heart attack the plan would therefore not be expected to pay out. But if life cover was included, which is unlikely to have impacted much on the cost, this issue is removed, which explains why stand alone CI is so rarely sold.
However, this could change in 2013. At least a little bit. The newly enforced gender neutrality rules means that stand alone CI could become more competitively priced, meaning that adding life cover could see a greater price differential than before. We will have to wait and see what happens next year with individual company pricing to see if this is true.
What it does
As the Mas description above says, cover is typically designed to pay a lump sum in the event of diagnosis of a serious and potentially life threatening illness. It goes on to day it is designed to pay off your mortgage, debts, or pay for alterations to your home such as wheelchair access should you need it.
I’ve often heard it said that the need for CI depends on two core factors: debts and dependents. If you have one or both there is potentially a strong need for cover, remembering of course that dependants may not just include immediate family but quite possibly business partners and employees as well.
What it doesn’t do
CI does not cover every illness and it never has. In fact, it does not even cover every type of cancer.
Policies cover serious and life threatening conditions as laid out in the policy terms. Not every policy is the same and some providers will cover illnesses and stages of illness differently to others.
Premiums need to remain affordable and as such the severity of when a claim will be paid is always changing. However, policy wordings are much clearer these days than in the past and will clearly state that less serious illnesses will not be covered.
Recent trends
The industry has seen what some refer to as the illness race over the last twenty years or so where one provider adds a few new conditions to out-do their competitors. More recently we have seen two other trends develop.
