Money: Dread illness deal brings hope of bettercover

Critical illness insurance aims to help not after death but on diagnosis of life-threatening disease. Until recently, differences between companies over how each illness was defined, meant policyholders could not be certain they had proper cover. As Nic Cicutti explains, things are beginning to change.

Imagine that you go to see your specialist and cancer is diagnosed. It is not immediately life-threatening, but will almost certainly involve months off work and potentially expensive treatment.

In theory, critical illness insurance aims to resolve the situation by paying a lump sum at diagnosis. More than 700,000 people are truck down every year by strokes, heart attacks and cancer. Most survive for at least two years.

The advantage of having such cover is that the person affected knows that any immediate financial problems can be solved. Mortgages can be paid off or holidays and convalescence arrangements made without worry.

But until recently, confusion between the 27-plus insurers over what constituted core definitions of illnesses typically covered by such policies meant those insured risked difficulty if they were struck down.

A few years ago, the IFA Association, which represents more than 2,400 independent financial advice firms, brought insurers together to agree common terms for a range of illnesses. These include heart attacks, strokes, kidney failure, major organ transplant, coronary artery by-pass surgery and total permanent disability.

While each insurer is free to improve on minimum standards offered by rivals, people considering which product to choose can do so knowing that the same definitions of these illnesses apply to all of them.

This week, the IFA Association has engineered a further agreement in respect of cancer.

The new definition describes cancer as a "malignant tumour characterised by the uncontrolled growth and spread of malignant cells and invasion of tissue. The term cancer includes leukaemia, but the following cancers are excluded: non-invasive cancer in situ, all forms of lymphoma in the presence of any Human Immunodeficiency Virus (HIV), Kaposi's sarcoma in the presence of any HIV and any skin cancer other than invasive malignant melanoma."

The new cancer definition is effective for all policies written after each company has formally agreed the new terms accepted by the IFA Association's own working party.

The definition could be seen in some quarters as denying cover to people most likely to be affected by HIV-related diseases. But, according to the IFA Association, the Terence Higgins Trust, which campaigns and provides care for people who are HIV-positive or have Aids, has welcomed the initiative in that at least it removes future uncertainty for policyholders who may face the onset of such illnesses.

Some firms do provide minimal protection to affected HIV-positive individuals, although it is likely to be only for "accidental" infection - such as where nurses or doctors accidentally jab themselves with an infected needle.

Gay people in particular are likely to have to wait a long time before insurers view their sexual preferences in the same light as they do promiscuous heterosexuals. Heavy-smoking straights will continue to get cover while safe-sex-practising gays won't. But that's only fair, isn't it?