Sometimes things which are presented to you sound too good to be true. This can ring true in the sale of insurance products; such as critical illness insurance. When things sound too good to be true, they should be looked at with skepticism.
Our law firm handles critical illness claims. Anyone can purchase a critical illness policy and receive coverage (provided that they are approved for said coverage). More often than not these policies are sold by independent insurance brokers/agents.
As with any industry, there are some excellent brokers/agents. And there are some less than excellent agents/brokers.
Ultimately selling insurance is largely a commission based business. The more policies which an insurance broker sells, the more money s/he will earn. That means there is a direct financial incentive for a broker to sell you a policy of insurance; whatever that policy might be.
Many people want to protect themselves in the event of injury, disability or illness. One of the ways of doing so is by purchasing a critical illness policy. Of all of the living policies, the critical illness policy is the equivalent to hitting the jackpot on the slots in Vegas. It’s a lump sum payout for a critical illness as defined by the policy. This is attractive for many consumers when comparing it to a disability policy which pays a monthly disability benefit which is subject to an all source offset and whereby the definition of disability changes at the two year mark. One lump sum from the insurance company sounds much better to most people. There is no need to worry about an on going multi year relationship with the insurance company. If all goes well the insured can receive his/her lump sum payout and move on with their lives. As oppose to a long term disability claim where the insured will be in a month to month relationship with the insurance company until the end of the claim (which can take many years to wrap up).
Critical illness policies are high risk, high reward policies which insurance companies don’t so easily pay out on. They will require substantial medical evidence in order to approve your claim. It’s not as easy to get approved as you will think.
Before purchasing a critical illness policy, it’s very important to read the fine print. While your broker may list the details of each and every critical illness; for each one listed there will be a very strict definition to be met by the policy holder to get approved.
Here’s an example:
That sound pretty simple doesn’t it. If you’re in a COMA, you will get approved for your critical illness benefit. Not so fast. Take a look at the fine print:
COMA: “A state of unconsciousness, with no reaction to external stimuli or response to internal need, continuing for at least 7 days. Life support systems must be required throughout the period of unconsciousness.”
That means that 1-6 days of being on a coma on life support won’t get you critical illness benefits under this specific policy. It has to be 7 days on life support with no reaction to any stimuli. Pretty strict definition of coma if you ask me. And one likely which the insurance broker/agent would not explain to you before selling the policy.
Let’s try another one.
LOSS OF LIMBS
This one sound even more basic that Coma set out above. You loose a limb, you get paid. Simple. Not so fast! Let’s take a look at the definition of Loss of Limbs:
“The irreversible severance of two or more limbs from above the elbow or knee as a result of an accident or medically required amputation“.
The loss of one limb won’t meet this definition. Nor will an amputation or two or more limbs below the elbow or knee (ankle/wrist amputations won’t meet the mark!)
Another example of the fine print which will get you. Your broker/agent likely would not have explained these exclusions to you either. But, in fairness, let’s try one more to see if we can get a simple and generous definition.
LOSS OF SPEECH
What can be tricking about this peril? Lost your ability to speak? You should get paid automatically. Sounds easy. Think again and read the fine print:
“The total and irreversible loss of the ability to speak as the result of physical injury or disease which must be established for a continuous period of at least 180 days. All psychiatric related cases related cases are specifically excluded.”
This one sounds like it ought to be straight forward but it’s the trickiest of them all! Firstly the loss of speech must be total and irreversible and last for a continuous period of at least 180 days. If you’re able to regain your speech, you get zero. Most troubling here is that the loss of speech cannot be related to any psychiatric related causes and that all psychiatric related cases are specifically excluded! What! Had your broker explained this to you, chances are you never would have purchased the policy in the first place.
To be completely fair, let’s try one last illness/disabilty:
Might be straight forward, or maybe not. Not sure if we can all agree on what it takes have “paralysis”. Let’s check the definition:
“Complete and permanent loss of use of two or more limbs for a continuous period of 90 days following the precipitating event, during which time there has been no sign of improvement”
I think where they will get you here is that the loss needs to be:
- Complete and permanent
- Two or more limbs (not one)
- For a continuous period of 90 days
- No signs of improvement
Harder to qualify for a benefit than you would think! These definitions are so tight it’s no wonder our law firm sees so many denials. Often times the insurers are justified in those denials because the policies are drafted in such a way that they are virtually impossible to collect upon. The wording is almost always drafted against the insured in favour of the insurer. This is why we examine broker’s negligence claims when we see critical illness denials. Often the broker will give false or misleading information to their client(s) in order to induce them to purchase insurance. Often times these definitions and exemptions are not explained at all to the customer. They are hit with a cold dose of reality when they try to claim under the policy of insurance. The broker has not only a fiduciary duty to serve and to properly inform his/her client; but also a duty of good faith in dealing with their client. They cannot sell them a product which doesn’t perform as they advertise.