Critical Illness Insurance

There is a news report that it may take several months for the insurance company to decide on a critical illness claim.

If you have to make a claim under different policies taken with several insurance companies, you have to complete a different claim form (with a medical report) for each company. They have not adopted a standard claim form.

Why is this the case?

For most of the 30 critical illnesses covered under the policy, it is quite difficult to define clearly the medical condition that is covered by the policy.

This uncertainly creates the following problems:

* delay in approving a claim
* dispute (if the claim is rejected)

This problem is made worse by the following:

* many people over-insure on the amount of critical illness cover
* the cost of this cover is much higher than life insurance
* insurance agents exaggerate the cost of treating these illness, and the frequency of these events
* the agents tend to over-sell on the amount of this cover (and enjoy a higher commission)
* the claim rate is not clear; so insurers charge a higher premium to cover the uncertainty

With this uncertainty and higher cost, it is not advisable for the policyholder to over-insure on critical illness. In my view, a cover of $50,000 or at most $100,000 is sufficient for most people. The remaining cover should be taken under a term insurance plan.