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Critical illness insurance offers financial protection if you are diagnosed with a covered condition, like life-threatening cancer, heart attack, kidney failure, or motor neuron disease. Despite its comprehensive coverage, scenarios exist where an insurance provider might withhold the critical illness insurance payout. These are called exclusions.
Critical illness insurance exclusions outline what a policy won’t cover, representing the boundaries and limitations of the coverage. Understanding these exclusions isn’t merely an afterthought but a pivotal part of making an informed decision. They serve as guardrails, defining the scope of the policy and shedding light on scenarios where the safety net might not extend.
This post equips you with the knowledge necessary to navigate through policy intricacies, ensuring that the safety net you’re investing in aligns with your expectations and needs.
What Are Critical Illness Insurance Exclusions?
An exclusion in an insurance policy refers to specific conditions, situations, or circumstances that the policy does not cover. These exclusions are explicitly outlined in the policy documentation and represent the limitations of coverage. They essentially delineate what the insurance company will not pay under the policy.
General exclusions found on every critical illness policy
While specific exclusions can vary among insurance providers and policies, some general exclusions are commonly found in every critical illness insurance policy. No critical illness benefit will be payable if the insured condition results, directly or indirectly, from any of the causes described below:
- Your attempt to take your own life or intentionally inflict injuries on yourself, whether or not you have a mental illness or understand the consequences of your action.
- Your attempt to commit, or commission of, any assault, battery or criminal offence, whether or not you have been charged with that offence.
- Your use or intake of any drug, poisonous substance, intoxicant or narcotic other than as prescribed and taken in accordance with the instruction of a licensed medical doctor.
- War, whether declared or undeclared, hostile action of the armed forces of any country, insurrection or civil commotion, whether you were a participant or not.
- Your operation or control of any motorized vehicle while your blood alcohol concentration is in excess of 80 milligrams of alcohol per 100 millilitres of blood.
Moratorium period
At times, individuals might sense the onset of an illness and promptly purchase a critical illness policy, intending to make a claim right after its effective date.
To mitigate this situation, insurance providers institute an exclusion period—also known as a moratorium period—during which specific conditions aren’t covered in the initial 90 days after the policy commencement. These excluded illnesses include life-threatening cancer and benign brain tumours. However, for Parkinson’s disease, this exclusion period extends to one year.
For example, upon purchasing a critical illness policy on March 1, you observe a spot on your arm in May. Taking precautions, you schedule a doctor’s appointment later in the week for an assessment. However, on June 10 (100 days after the policy effective date), you were diagnosed with stage 1 malignant melanoma. Despite the cancer diagnosis occurring after the 90-day moratorium period, your claim would be denied since your symptoms appeared during this time.
Survival period
The survival period—also called the waiting period—applies to cardiovascular conditions and procedures. It spans 30 days from the diagnosis or surgical date and does not include any duration during which you rely on artificial life support. To meet this requirement, you must be alive at the end of the survival period and not have encountered irreversible loss of all brain function. Only then will the insurance company pay the lump sum benefit.
The survival period applies to cardiovascular conditions, specifically these covered critical illnesses:
- Aortic surgery
- Coronary artery bypass surgery
- Heart attack
- Heart valve replacement or repair
Qualification period
This represents the timeframe in which you must display symptoms, neurological impairments, or functional losses or fulfill specific criteria before the lump sum amount is paid. The table below shows the covered conditions that have a qualification period.
Critical illness | Qualification period |
|---|---|
Acquired brain injury | 180 days |
Bacterial meningitis | 90 days |
Coma | 96 hours |
Dementia, including Alzheimer’s disease | 6 months |
Loss of speech | 180 days |
Multiple sclerosis | 6 months |
Occupation HIV infection | 90 to 180 days |
Paralysis | 90 days |
Permanent or temporary loss of independent existence | 90 days |
Stroke | 30 days |
Exclusions for covered conditions
Many covered conditions also have exclusions where the lump sum benefit will not be paid. For instance, in the case of benign brain tumours, the policy will not pay out benefits for pituitary adenomas smaller than 10 mm. Similarly, under loss of speech, benefits will not be payable for psychiatric-related causes.
Exclusions due to pre-existing conditions
During the application procedure, you’ll undergo underwriting, wherein the insurance company evaluates your risk of developing a covered critical illness. If your risk level is higher than the average, your policy might be issued with a medical impairment specifically excluded from coverage.
For example, if you were previously diagnosed with more than one occurrence of basal cell carcinoma, there will be an exclusion for skin cancer on your policy.
Likewise, in the case of a blind person, the insurance company may have blindness excluded from the critical illness coverage.
Exclusions due to family history
A family’s medical history holds substantial weight in determining the susceptibility of an insured person to certain illnesses. A family history marked by diseases or premature deaths—particularly when diagnosed at a younger age—can signal a heightened risk for similar conditions in the insured person.
Underwriters closely assess the number of immediate family members affected by medical conditions, like parents and siblings. Conditions with strong familial ties, like cancer, cardiovascular disease, diabetes, and dementia, may result in a rating (higher premium) or an exclusion.
Exclusions due to lifestyle risks
Besides pre-existing conditions, underwriters pay close attention to your lifestyle. Certain high-risk avocations may warrant exclusions depending on various factors like frequency, qualifications, and more. For example, if you do mountain climbing, you will need to disclose your climbing height, difficulty level, location, and whether you do it alone or with another person.
Exclusions are applied to these activities, meaning any covered critical illness from an accident during these pursuits might not be paid. For instance, due to a history of motorcycle racing, your insurance policy may contain an exclusion for this activity. If one of the normally covered conditions, like paralysis or coma, occurs due to a motorcycle accident, the policy will not cover it.
Here is a list of hobbies that may pose a concern for insurance companies:
- Aviation
- Automobile racing
- Boxing
- Hang gliding
- Bungee jumping
- Martial arts
- Motorcycle racing
- Mountain climbing
- Rock climbing
- Scuba diving
- Sky diving
Other modifications besides exclusions
Besides exclusions, here are a few other possible decisions from the insurance company.
Standard
In the best-case scenario, the premium and coverage remain exactly as initially quoted without any modifications. This situation represents an ideal outcome where the terms offered align perfectly with the initial proposal, ensuring no adjustments or alterations to the quoted premium or coverage.
Rating
Ratings, which represent higher premiums, are used more frequently than exclusions. The maximum rating is usually 250%, meaning the cost will be two and a half times more expensive than the standard rate. This adjustment in premium serves as a means for insurers to account for increased risk factors while still providing coverage for certain conditions.
Postpone
Insurance companies may choose to delay your application until a later date. This approach mitigates some uncertainties surrounding your recovery trajectory. By postponing the application, insurers gain a clearer understanding of your post-diagnosis health status, minimizing the ambiguity associated with the immediate aftermath of a medical event.
Decline
A decline in insurance coverage typically occurs when the risks associated with your pre-existing condition are deemed too substantial for the insurance company to underwrite.
For example, cancer, major organ failure, major organ transplant, amyotrophic lateral sclerosis (ALS) or Lou Gehrig’s disease, or testing positive for human immunodeficiency virus (HIV) would result in a decline of insurance coverage.
Have Questions About Your Critical Illness Insurance Plan?
Before you u, being aware of these exclusions equips you with a realistic understanding of the scope of the insurance coverage. It’s not about dwelling on what’s excluded but empowering yourself with the knowledge to make an informed decision.
Remember, thorough scrutiny of policy details, clear communication with your insurance advisor, and understanding your personal health needs are essential in ensuring the proper coverage. By grasping the nuances of exclusions, you’re securing peace of mind by knowing the extent of protection your policy offers.
So, as you embark on this journey towards safeguarding your future health and finances, consider exclusions not as roadblocks but as signposts guiding you towards a well-informed choice. Armed with this understanding, you’re better prepared to select a critical illness plan that aligns perfectly with your needs and expectations.
Please feel free to reach out to us at info@briansoinsurance.com or 604-928-1628 for a complimentary consultation to help you understand the exclusions of a critical illness policy. You can also use the form below to receive a free quote delivered directly to your inbox. We’re here to help you find the coverage that best suits your needs.
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While we make every effort to keep our site updated, please be aware that timely information on this page, such as quote estimates, or pertinent details about companies, may only be accurate as of its last edit day. Brian So Insurance and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser. This post is a brief summary for indicative purposes only. It does not include all terms, conditions, limitations, exclusions, and other provisions of the policies described, some of which may be material to the policy selection. Please refer to the actual policy documents for complete details which can be provided upon request. In case of any discrepancy, the language in the actual policy documents will prevail. A.M. Best financial strength ratings displayed are not a warranty of a company’s financial strength and ability to meet its obligations to policyholders.
