To help you to understand some of the different terms used when you are researching critical illness plans, we've included some of the main ones in the brief summary below.
Guaranteed premiums - ensure's that you the premium rate you start with is guaranteed for the length of your policy. While guaranteed premiums are often slightly more expensive to begin with as time passes by they could represent really good value for money, especially if the companies claims experience is high and as such they start charging considerably more for critical illness plans in the future. Many providers have been trying to make revivable premiums more attractive over the last few years in an effort to reduce the amount of guaranteed premium plans they sell in comparison as they have been worried about the potential of significant levels of claims in the future. However, the popularity of guaranteed rates with professional advisers because of the certainty of future cost that they provide for there clients means that you will still find policies with guaranteed premiums fairly common place.
Reviewable Premiums - are not fixed and allow your provider to review your premium at set points in time as outlined in the key features document. Reviewable periods are provider specific and relevant to the plan being quoted. Most providers offer reviewable premium rates.
Waiver of Premium benefit - is an additional option that can be added to the plan at outset. If included, it means that the provider will pay the premiums for your plan on your behalf if, for a period of 6 months or more, you suffer an illness or injury that prevents you being able to work or if you are unable to complete a number of basic activities that you have to perform in your work and in daily life. If the waiver of premium benefit on the plan you chose is activity based, those activities are normally defined in the Plan's terms and conditions. Subject to a valid claim, the provider will normally pay the premiums on your behalf from the seventh month of your incapacity for as long as your claim is valid or until your Plan ends. Although often very small, there is an extra cost for including waiver of premium benefit.
Indexation - this is an option that can be include at outset and helps to keep the buying power of the benefits payable from your plan in line with inflation.When you start your plan, you can normally ask the provider to increase your cover each year in line with a fixed percentage amount or the increases in the Retail Prices Index (RPI). Your premium would also increase each year to pay for the extra benefit. No medical evidence is required at the time of each increase.
Total Permanent Disability (TPD) - TPD is normally available as an option with critical illness plans and is normally found as part of the 'comprehensive' or 'additional conditions' level of cover available. It is designed to pay out a lump sum benefit to the person covered in the plan who becomes totally or permanently disabled through injury and/or illness. It helps relieve the financial pressures of not being able to go to work and can help with added rehabilitation and medical expenses.
Underwriting - is normally stricter for critical illness plans than life insurance plans but can now be can now be done over the phone through tele-underwriting where questions asked can be tailored to the individual applicant's circumstances. This has proven particularly practical with many providers having already extended their application forms up to 30 pages to help identify higher risk individuals.
To research your critical illness position further you can use our exclusive interactive research tool, the critical illness finance navigator.
