Review Critical Illness Cover

Insurance companies’ investment management can be described as the adjustment of the proportions of the total fund invested in different sectors in accordance with their view of prospects at the time. Since most companies have a substantial excess of income over critical illness claims (that is, they are expanding, taking in more money from new policies each year than they are paying out on old ones), they have always got money to invest.

By choosing the right sector to invest their new money in each year, they can therefore over a period of years improve on the average performance of anyone of the three main investment sectors. Since fixed-interest investments (largely consisting of Government securities) can, unlike shares or property, easily be bought and sold in large quantities, they also have considerable scope for manoeuvre in taking advantage of fluctuations in interest rates. They may sell their fixed interest stocks when a rise in interest rates looks probable, take temporary advantage of high short-term interest rates on deposits, and reinvest in longer-term when a fall in interest rates appears imminent.

Down the numerous years, these decisions, like compound interest, add up. They can easily account for a disparity of 3% compound per annum in overall fund performance. Over a period of 10 years, for example, the disparity might be between growth at an average 5.5% p.a. and growth at an average 8.5% p.a.: £1,000 invested at the start of the period would be worth £1,708 and £2,261 respectively at the end of it.

The other main factor is the proportion of the company’s income that is taken by expenses. Head office staff, invest­ment managers, marketing and commission, regional offices and salesmen are all costs that have to be met out of the income obtained by way of critical illness insurance premiums and income from investments. The higher the proportion of income taken by expenses, the less there is to invest for critical illness insurance policyholders, and so maintaining efficiency and keeping expenses down is a major factor in producing good results.

Coma is a condition of sleep with no response to exterior spur or interior needs which will need the use of various equipments and survival elements for a continuous phase of at least 96 hours. Coma is accepted by critical illness insurance if it results in an unending neurological breakdown with persevering scientific indications. 

For the above definition, coma which occurs as a result of alcohol or drug abuse is not covered.

What is it?

Coma is a state of unconsciousness where there is no response to any form of physical stimulation and no control of bodily functions. A coma can occur due to head injury, brain tumour or other harms to the brain, for instance bleeding or the lack of oxygen.

When would critical illness insurance pay?

Critical illness insurance will take a claim into consideration if the condition of coma lasts for at least 96 hours, with life support being essential all the way through, resulting in everlasting damage to the nervous system.

When won’t critical illness insurance pay?

Critical illness insurance will not award the cash if exclusions found in the policy are claimed for. Most insurers will not pay if the coma has been due to alcohol or drug misuse.