"I've been recommending insurance policies to protect people against illness for seven years. In January 2001 I received a phone call that every financial adviser fears. One of my clients had called me let me know that his partner had been diagnosed as having cancer. Fortunately they had a policy that would help them through the financial effects. You sell these policies in the hope that people will not need them. It's not until someone actually claims that you realise the full importance of the job that you do!"
Chris Morgan editor pinkfinance.com and qualified independent financial adviser.
How would you cope if you were not able to spend any money on yourself? What if you're standard of living was drastically reduced due to illness? The fact is that it could happen!
Most people think of financial provision in the form of savings or investments. They contribute to ISA's or Pensions to create wealth for their future, but fail to think about the effects of a serious illness.
Add up all of your available wealth and then divide your monthly salary into this figure. It would be very surprising if you had 6 month's worth of provision in the bank. If you're paying into a pension it is unlikely that you'll be able to draw the benefits before you are 50. If you do they probably won't keep you in the manner that you're accustomed.
The idea of this article is not to scare you, but to highlight the issues that exist. You should know that there are ways in which to preserve your savings and not rely on your pension for cover. In return for a monthly premium many companies will pay out a lump sum benefit if you're diagnosed as having one of a list of specified critical illnesses.
Lump sum Personal Income Protection or Critical Illness Cover is one of the recent additions to the range of insurance products on the market. Companies will pay out an agreed sum assured that can then be used to clear debts, your mortgage or pay for treatment. This kind of cover would give you the choice, room to think and time to recover - without worry. The cover can be obtained alongside a mortgage or as a separate plan and if you recover from your illness following payment, they do not require the money to be repaid.
Medical technology is increasing so rapidly, that doctors can keep you alive with conditions that 10 years ago you would not have survived. In these circumstances a standard life assurance policy would be of little use. The fact that you are then unable to work then causes financial problems.
Critical Illness cover was invented by a cardiac surgeon who recognised this financial need through his patients, immediately following surgery. These policies now cover anything up to 20 different conditions. These range from cancer, heart attack, stroke, major organ transplant, through to kidney failure, deafness and blindness.
Many companies now offer this cover, however, you should be aware that cover offered by banks generally cover fewer illnesses and charge a higher premium. It is important to check for differences in the small print, the amount of illnesses that are covered and the time that has to elapse before payment of benefits. You should also take care to select a company that does not ask personal lifestyle questions. If you answer these questions they may request an HIV test and load your premiums. There are companies that will offer cover to the gay community, however, each case is individual. If you decide that critical illness cover is important to you then you should approach a financial adviser with knowledge of gay issues. They will be able to arrange cover without the third degree questions.
©2001-2002
Please note that the articles contained within this site were written for Pink Finance and are subject to copyright. They may not be reproduced in any form without prior written permission from the editor@pinkfinance.com.