Financial crisis or even catastrophe can follow from misunderstandings by people with insurance policies for permanent health, medical expenses and personal accident, according to the Insurance Ombudsman, Ms Paulyn Marrinan Quinn.

The Ombudsman told Health Matters that she had seen "a lot of broken hearts" due to misunderstandings about disability insurance. "They are not medical expenses policies," she stresses and advises people who take out disability policies: "Don't let medical insurance policies go." She also warns that with critical illness policies "not every critical illness is covered".

It's important to realise this and to know what is and what is not covered by a given policy.

Misunderstandings about permanent health insurance (also called salary protection insurance) can lead to financial catastrophe for an individual and his or her family. The Ombudsman says that some people think if they are "deemed disabled within the meaning of the policy they would be paid forever".

But these policies often contain provisions whereby the company retains the right to have a policy-holder reviewed. She stresses that permanent health insurance policies are not necessarily what their name might suggest: "They are not for life. Permanent health insurance isn't necessarily forever."

Back injuries, in particular, tend to be a "grey area" because the policy-holder "might sufficiently recover down the line". Disputes can arise if benefit is stopped after it has been paid for some years if the company judges that the claimant is fit to return to work.

The Ombudsman says in her recent annual report that definitions of disability differ from one policy to the next and these can "substantially affect the scope and value of cover provided".

She emphasised to Health Matters that it was vital to realise some policies cover you for disability in the event of your being unable to carry out "your own occupation", but others only insure you against being able to carry out "any" occupation.

The Ombudsman reports a case involving medical insurance. The complainant's wife underwent emergency surgery performed by a surgeon who was not on the insurance company's "full cover scheme". The company paid the standard benefit of £482 leaving the complainant to pay £393. The complainant argued that the medical health insurance company failed clearly to alert policy-holders that balance billing could amount to some 100 per cent of the amount paid by the company.

The company argued that its "guide to plans" told subscribers that their GPs could advise them if a consultant was participating in the "full cover scheme". It contended that the onus was on the complainant to establish the financial implications of availing of a given consultant.

The complainant argued that it was unrealistic and unreasonable for the company to expect him to "shop around" for a participating consultant when his wife required emergency surgery.

The Ombudsman found that the company made no distinction in its guide to plans between emergency and elective surgery. Moreover, she noted that the consequences of engaging a surgeon not participating in the full cover scheme were not clearly identified by the company. Accordingly, she recommended that the company pay an additional £100 contribution to the surgeon's fees.

Self-employed people taking out disability insurance should be clear about how any benefit arising from the policy will be calculated. One self-employed complainant put it to the Ombudsman that her disability benefit should have been calculated on the basis of her gross turnover. But her insurance company wanted to assess it by reference to her net profit. The Ombudsman found that the policy interchanged without definition words like savings, earnings and wages. She ruled that a compromise was in order and directed that some business-related expenses should be added to the insurance company's basis for the calculation of benefit.

Another misunderstanding arose when a complainant joined a life and salary protection scheme through her trade union. Subsequently, the union agreed revised terms with the insurance company. The age limit in the event of disability was reduced from 65 to 60.

The complainant became eligible for benefit under the scheme but was informed it would cease when she became 60. She argued that she had not been informed of the revised terms. The company held that all reasonable steps were taken to inform all members.

The Ombudsman was satisfied that if a duty of care arose to adequately inform all members "it rested with the union and not with the company". As Insurance Ombudsman she had "no jurisdiction in relation to the actions of the union and accordingly could make no comment on its liability in the dispute".