Critical Illness Cover policies usually carry a ‘total and permanent disability’ definition. Many people view this definition as a safety net in that if they have suffered an accident or illness that has not been one of the ‘specified’ illnesses but they still cannot return to work due to the nature of their illness or injuries,, then a claim can still be made. The ABI (Association of British Insurers) gives the following guidelines to insurers as to what the definitions of total and permanent disability are:-
Total permanent disability
There are a number of definitions used for Total Permanent Disability. For example, “total disability” may be measured by
assessing the person’s ability to perform certain of the following:
The insured person’s “own occupation”.
“Suited occupations”.
“Any occupation” whatsoever.
A number of specified activities – for example, activities of daily living or functional ability tests.
Change of occupation
Depending on whether the definition used relies on the occupation of the person covered, this occupation may be disclosed
and underwritten at the outset of the policy. Where this applies, subsequent changes of occupation may vary the initial underwriting
assessment. Insurers normally deal with this issue in one or a combination of the following ways:
Notification is required.
The new occupation is re-underwritten and the terms of the contract are adjusted if necessary. The customer’s
ability to perform an occupation (or one that is suited, depending on the definition) is judged against the occupation most
recently notified (if all changes have been notified as required).
Notification is not required.
The customer’s ability to perform an occupation (or one that is suited, depending on the definition) is judged against the occupation
being followed immediately before the claim. In this case, the insurer accepts the risk of changes in occupation.
Alternatively, the insurer judges the claim against the occupation declared in the application, regardless of subsequent changes.
Guidelines
Insurers are free to use any one or more definitions of disability they wish, including but not limited to those shown in 6.1 above.
Insurers should make it clear in their product information which procedure is adopted in relation to change of occupation together with
the potential consequences.
If insurers require notification of changes in occupation, they should periodically remind the policyholder.
Clearly there is some room for interpretation with regards to the total and permanent disability defintions within a critical illness policy so it’s worth checking your policy to see exactly what you are covered for. Many people think that by having a critical illness policy with ‘any occupation’ for the total and permanent disability option is better than having ‘own occupation.’ This is not the case as most people tend to stay within their occupation for life. A policy with an ‘own occupation’ definition should pay out if you are unable to perform the day to day duties of that occupation. A policy that has an ‘any occupation’ definition however, might not pay out in that the insurer could argue that although you are unable to perform the duties of your own occupation, you should be able to perform the duties of other occupations.