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Thoroughly modern policies

When we think of term insurance, we often think the cheaper, the better. Of course, for life cover, there is often little else to distinguish one policy from another.

However, for critical-illness cover, it is important to delve deeper than just comparing premium rates. IFAs will have a list of must haves to satisfy before recommending a policy.

Any critical-illness policy should at least adhere to the ABI&#39s model definitions of conditions. It should cover a comprehensive list of illnesses and conditions, have total permanent disability benefit, waiver of premium benefit, automatically include children&#39s benefit and preferably be on an own-occupation basis. It should also have competitive premiums.

But should it stop there? Critical-illness cover continues to evolve so basic requirements for recommendation should evolve, too.

To keep pace with recent developments, IFAs should be thinking of adding the option to reinstate cover after a claim, automatic inclusion of serious accident benefit and a first-rate claims&#39 service.

Several providers now include cover reinstatement in some form. This was initially marketed as buyback – the option to reinstate life cover after a critical-illness claim – but, more recently, true critical-illness cover reinstatement has become available.

Let us not forget that a client&#39s financial planning may cover the next 20 or more years. The person who claims in the early years of a critical-illness policy has the prospect of a very welcome payment from the policy. But they also face being uninsurable for critical-illness cover for future years. This is the person who appreciates, more than anyone else, the value of critical-illness cover and the ability to be able to claim again for either the same type of illness or for a different illness.

They will also appreciate the need to ensure that cover is as wide as possible and the aim of the product provider and IFA should be to offer the broadest possible cover in all cases. So there is every reason for IFAs to apply the same must-have rules to the reinstated critical-illness cover as they did to the original policy. This means the reinstated cover should be as comprehensive as possible, offer a high sum assured and give cover for as long as possible.

Our own business shows that 25 per cent of clients include the option to reinstate cover – a real sign that people are happy with an option that gives real value. So life cover buyback or critical-illness cover reinstatement should surely now be basic criteria for selection.

Ten years ago, an airbag on a new car was a special feature and only available on more expensive models. Nowadays, it is standard and something we take for granted. Serious accident cover should be the airbag of the criticalillness policy.

Suppose a client suffers serious back injuries in a car crash and is taken to hospital. What if the prognosis is uncertain – would this qualify for a claim under critical-illness cover? Probably not because the client is not paralysed and it is too early to tell if the disability will be total and permanent. Doctors rarely want to make such a damning statement during the early stages of recovery.

Yet the client bought a policy because it pays out if the unthinkable happens. How do you explain that this is not one of the benefits covered?

A new feature on the critical-illness market is serious accident benefit. It pays out if the client is in a serious accident and is hospitalised as a result. This means the client can have some money at a critical time even if they do not meet any of the specific illness definitions.

What is more, depending on the product, the client may also be able to keep the underlying cover in place, too. This means that if they were later found to be paralysed or totally and permanently disabled, the company would pay out the full sum assured.

A care service quickly became a must have for IFAs when recommending a long-term care product. Why should it be any different for critical-illness cover? After all, the sum assured may be earmarked for a particular reason, such as paying off the mortgage.

Irrespective of the money, people always want the best treatment possible. For critical-illness cover, the best treatment could make all the difference.

For example, would you know if the diagnosis you have is correct? Or if the treatment suggested by your local hospital is the best and not a cheaper alternative with less effective results?

Ask any critically ill claimant and they will tell you that getting better is more important than the money.

Critical-illness sales continue to flourish. However, as the market develops, IFAs should be reviewing their panel selection criteria to reflect significant developments. Not only does this move the game away from the cheapest-is-best perspective but it gives IFAs the opportunity to offer added-value products and to distinguish the products they recommend from those often offered by the bancassurers.

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