Life Insurance Policy – ABC

Summary
Permanent Health Insurance, Life Assurance and Critical Illness Insurance should all be contemplated by people who have a spouse or children or anyone dependant on them for financial security. Read this article to find out what is relevant and available.

It is deplorable but a fact that 1 in 3 of us will go through some form of cancer before we reach the age of 65. Sheila Downs,a director at Alex Peacocks and Partners,a firm of Independent Financial Advisors, says “”This is why protection insurance is vital, as these are not great odds”. Life Assurance is the most popular cover taken out, even though it is questionable as to whether it is the most essential.  Life Insurance is crucial if you have a wife or husband or dependants but not if you don’t as it settles after you die.  Most people think that they can’t afford take out Life Assurance but the real truth is that they cannot afford not to have if they have a family to support and protect.  JD Metcalf and Sons a firm of Financial Advisors reveals in a  recent survey that twenty four per cent of people with children don’t know if they have Life Assurance or not and 25% don’t have it.

Many employment packages include quotes for cheap life insurance cover but they are normally not enough to supply an income for a spouse with dependants and cover the mortgage too.  A average rule is to cover yourself for twelve times your annual pay.

Tesco Finance’s investigations have revealed that during the last thirteen years the average price of Life Cover has gone down by 44 per cent simply because people seem to be living longer due to some extent to medical improvements enabling sick people to recover from illness that, at one time, would have been terminal. People who already have life assurance are probably not aware of this fact and do not stand to gain anything except for when a claim is made, so ought not to feel that they have to stay with their present insurance company – there may well be much better deals around now.

On the other hand, Permanent Health Insurance and Critical Illness Insurance premiums are rising for the reason that people are surviving severe illness and are making a claim on the insurance.  These types of insurances are extremely vital and must bebudgeted for if there are no dependants. Maybe you should ask yourself the question, can I afford not to have an income?  For a lot  of us the answer is no and all should have income protection.

Income Protection Insurance settlesa tax-free income which is worked out on a percentage of your income for ‘non-critical’ as well as critical illness and for the whole length of time that you don’t work.

Critical Illness cover, if you become potentially terminally ill, will pay out a tax-free lump sum,, which can help to reduce money worries or provide for any adaptations that may be necessary if your mobility was to be affected.  Statutory sick pay doesn’t pay out enough money to assist with the financial impact that critical illness can produce.

The insurer assesses a payment on your risk profile.  If you have a family history of sserious illness or you smoke or drink heavily your premium will be much higher.  Premiums are gauged on the individual person but if some of your family have been critically ill, particularly under the age of forty eight, this could increase your payments by forty eight per cent.

Summary
Quite a few people with critical illness insurance cover do not really understand how these policies work. There are appeals for more stringent guidelines on the presentation of such insurance policies. Some people need more facts on plans which best suit their individual needs.

The main financial regulator published its worries four years ago that thousands of policyholders did not appreciate what their policies covered. Those uncertainties are still valid.

The Financial Services Authority (FSA)stated that industry data showed that providers, including supermarkets, insurers, financial advisers and banks often made no effort to establish if the cover was acceptable and little explanation was provided to clients of how critical illness cover works. While most companies were working to adhere to enhanced standards, others carried on offering an inadequate service.

In the event that a stroke, heart attack, canceror other listed life-threatening illnesses strike, critical illness cover, insurance pays out a lump cash sum. Inevitably, it is clients who are worried about repaying  mortgages and loans if they become unable to stay in work, who buy this cover.

There are two types: those policies where the premium is fixed for ever (a guaranteed premium) and those where the payments increase over time. Figures from the Association of British Insurers indicate that, in total, there are over of 5 million life insurance policies covering eleven million policyholders. An average policy will pay out sixty eight thousand pounds.

Insurance protection policies have proved to have critics. While they might beof use, these “protection” insurance policies have proved controversial and industry critics say that not many people make a claim. There is no data available on the number of claims made in comparison with the total money spent on the policies. The city regulator, the Financial Services Authority review did reveal, however, that on average, 24% of the claims made are invalid.

Recently, in one situation a client was diagnosed with cancer but medical teams could not say which one. The policyholder was regretably informed it was unlikely doctors would know for certain until he seven feet under.

Until a diagnosis was available, his insurance policy would not pay out. The plan holder’s family appealed realising that should he die, the insurer would pay out a life insurance policy worth twenty five thousand pounds rather than the critical illness policywhich was worth more than 80,000 pounds as only one policy can pay out. The argument with the insurance company caused infinitely more stress to the policy holder. After a public fight, the insurer agreed with the claimant and paid out on the  critical illness policy.

Which?, previously known as the Consumers’ Association,  said it thinks the situation is significantly more serious than the City Regulator claims and that sales of critical illness plans are at the centre of a far-reaching mis-selling problem.

Michael Chunkline, principal policy specialist, says brokers, commission-hungry advisors and finance companies, saw a chance to make  a big pay off. He said Which? had forecast the mis-selling that was observed in the pensions industry and would be replicated in the critical illness sector.

His observations are on the back of complaints in in the House of Commons regarding the mis-selling of critical illness protection policies. Max Bing, the MP, says the City Regulator’s study reveals there is a significant risk that insurance policies are being sold to the public who don’t understand what they are buying or who don’t even need them. The MP wants the Financial Services Authotity to make changes to its rules that would restrict critical illness sales to specially regulated financial consultants working under new FSA guidelines.

Summary:
The incentives provided by life insurance cover are balanced with the benefits of critical illness cover policies. The reasons why it is advisable to sign up for critical illness cover now.

Ask yourself this question ‘If illness prevented you from working could you afford to pay your monthly commitments?’ The vast majority of us would say ‘No’. So without doubt we need to consider insuring ourselves against unpredictable events. A cheapest critical illness insurance policy would pay out a tax free lump sum if the insurance policy holder is diagnosed with a potentially terminal illness. The lump sum may be spent in various ways. For example, you could make alterations to your home to accommodate a wheelchair,simply settle your bills or pay off your mortgage.

The next few months will see a sharp rise in premiums, so if you don’t have cover at the moment, now is the time to sign up. The cost of life insurance has has lowered over the past 15 years. There are various reasons why this has happened. First of all the Aids epidemic, that was expected in 1980-1985 never occurred and secondly the survival rate of those suffering from heart attacks and cancer has significantly improved. These facts have enabled have gone up. Protection is frequently reassessed by insurers, when the number of claims for certain illnesses are assessed. Following such a review AXA will be amending premiums soon, with the cost of life cover coming down slightly and the payments for critical illness insurance cover going up. The insurer is unable to say by how much, as the client’s situation and the sum insured for vary from client to client, but the increase should not be massive.

Then again Best Deal  is forecasting that there could be increase of between 32 and forty five per cent in critical illness premiums over the coming months. It also fears that guaranteed rates may either become to highly-priced for many, or even come to an end due to the volatile marketplace.

Swiss Re has announced that it is refusing to underwrite critical illness cover from the end of the year as the cover is costing them too much.

The cost of insurance has been put up by two major insurance companies.  A twenty to twenty five per cent risehas just lately been publicised by Swiss Life and L & G. Nevertheless this is small beer compared to the incredible price increases written into the covers now available from BUPA and Friend’s Provident, which vary between forty to fifty per cent.

It is feared that this development will be followed by all the other re-insurers. Fixed rates where the monthly price is held for a precise term, typically 12 years, may no more be given by insurersInsurance Companies.  Henceforth, premiumswill be reviewed yearly, just like car and home and contents insurance. The outlay for the consumer will be much more in the long term. The message is clear. Critical illness Insurance is getting more expensive so buy it now to gain from fixed premiums and the relatively low premiums being givenat present. Let us wish that you will never have to claim, but figures state that unfortunately many of us will.

Summary

The system in which the seriousness of an illness can influence the pay out. How insurers are writing new plans which offer limited pay outs.

Being informed that you have got  cancer is shocking news. At some phase within our lives, one in three people will develop the disease. It is not unexpected that Axa PPP Health Care found that of all illnesses, cancer causes British people utmost apprehension.

At this difficult time you would expect an immediate settlement by your medical insurers, making it possible for you to concentrate on getting better. Sadly you could be in for a big shock. Lots of cancer patients make a complete recovery with thanks to advances in medical science. In this day and age some cases are not looked upon  as severe, so it is disturning to learn that most medical and life insurance plans only pay out when your illness is terminal or life threatening.

An independent financial adviser, counsels that people should not assume that they will receive a pay out  they have been diagnosed with a severe illness. He advises people not to focus on the cost alone when taking out insurance, but to study the terms and conditions in a private health insurance or critical illness policy to guarantee that the insurance company will pay you when you need it most.

On the diagnosis of a specific condition, critical illness cover will settle a lump sum. Whereas, you will receive superior quality and speed of treatment with private health/medical insurance. Such as, suitable licensed treatments maybe offered, which are not provided on the NHS. A spokesperson of independent advice firm Direct Life and Pensions says about 17 per cent of claims fail on protection policies and at least for serious illnesses and diseases. Then again some cancers sound much more severe than they are and in these situations you probably won’t receive any money from traditional plans.

At one time insurers had an all or nothing approach, but they are now beginning to supply policies with a partial or full payout. An example is PruProtect, an alternative critical illness policy from the Prudential, which connects the size of the settlement to the gravity of the illness and how much anguish it will cause. This policy does not turn out to be void once a claim is made but following pay outs may be decreasedsignificantly. This feature is specifically crucial when the patient is diagnosed with a stage 1 or stage 2 cancer, which may become even more serious.

Recently the insurance industry dealt with the vexed issue of customer non-disclosure. The Association of British Insurers has brokered a new agreement, which will permit claims effected by non-disclosure to get a partial or full pay out, which was not the case before.

Summary
The need for clarity and truthfulness when writing critical illness insurance policies. This article spells out the problems.

Very little is more worrying in life than to be diagnosed with a serious or chronic condition. Concerns are made much worse when your insurance company informs you that they won’t pay up on your critical illness cover or private medical policy for the Cancer or HIV you are afflicited with.

You are asked to read sub-clause six of paragraph 328 of the small print, which informs you that you have got the  wrong kind of cancer. Only the first five days of your treatment will be paid for and only tumours below the knee are covered, then it’s down to you to find the finance.

This situation may sound ridiculous, although brokers and insurance companies are regulated, this type of system continues to carry on. It has been a long drawn process to clean up the industry and to ensure consumers get a fair deal.

Just recently Cancer Backup, a registered charity, emphasizes this predicament by coordinating a large assortment of  shopping surveys, which brought to light some alarming facts about the private medical insurance industry. It discovered that of all the leading insurers only HAS provided cover for cancer patients all through the duration of their illness. Only immediate treatment is covered by most of the health insurance companies. Treatment or care over a lengthyperiod, such as hormone replacement or chemotherapy is not normally included.

Although insurers and brokers want to finance long term life insurance cover for insurance holders with chronic illnesses, they won’t always make it clear to likely customers, at the time of signing up what they are covered for.

Although both  Cancer Backup and Macmillan Cancer support have been in discussions with like mindedorganisations within the market to raise the standard of sales practices and make the small print of policy documents much clearer, progress has been slow since the report was published two years ago.

Critical illness cover and private mortgage insurance  is usually taken out by people who are comparatively fit and healthy. Getting cancer is the last thing to cross their mind. That is why it is  so important to specify an insurance policy’s exclusions before they sign.

A statement of best practice for insurance companies writing and selling medical policies has been revised recently by the  ABI, which is a welcome step in the proper direction.

The trade body has now advised that insurance companies and providers selling these forms of insurance should prepare similar case studies, which explain the situations when a policy will or won’t be paid. Unfortunately insurance providers are not obliged to stick to this code, which is voluntary.

While the  Association of British Insurers initiative is to be welcomed, the best way of amplifying a policy is by asking the salesman to explain the small print.

Nevertheless, industry jargon is in spite of everything still being used by insurance companies to bewilder the client. For example it is not right to classify cancer as an acute or chronic illness, deliberates Cancer Backup. On the other hand insurers are insistent that it should go in the chronic category. customers are only informed about this when they make a claim.

Although the  Association of British Insurers have got their responsibilities right, the insurance companies can only be required to better their principles by the regulator. Much more detailed training of call centre staff, who sell a greater part of the insurance policies, is also long overdue

More meticulous marketing procedures are essential with terminology being removed. At the end of the day it it is the duty of the insurersinsurance companies to ensure that their clients are fully aware of the terms of their mortgage insurance before they put pen to paper.

If you have a family history of ill-health or if you dink heavilyor smoke excessivly you might be under the illusion that life insurance cover or critical illness cover may be very very costly. A director at Scottish Mutual, Mr Y, says this is rarelythe case, “Some of those eating ‘too much’,excessive drinking or heavy smoking may wellshy from protection for fear of being unduly penalised for their appallinghabits. Consequently, they will most likely find that these essentialforms of financial protection cost even less than they thought.”

Mr Y a specialist re-insurer, says only twenty per cent of the working population have life insurance protection and only 18  per cent havecritical illness insurance, even though it is generally believed that if you are working and/or have dependants and a mortgage, this safety is important. Vast amounts of people are taking unnecessary risks.
If a person were to die suddenly their life insurance will pay out on their death and with a bit of luck will be enough to to clear the mortgage debt, and/or provide any relatives with financial security.  In the case of CICit pays out and helps at this time.  Even though medicine is improving all the time and people are getting better from life-threatening illness, they are more than likely unable to work periodically or are forced  to give up completely; this is when a tax-free cash lump sum can create the financial security wanted.

If a person does drink or smoke insurance premuims will be higher but they do vary a lot between one insurer and another. And  they also vary between critical illness cover and life insurance cover. Scottish Mutual doesn’t raise premiums until somebody is drinking the equivalent of four to five pints daily.  For a non-smoking 34yr old, drinking less than 9 units per day, for 120,000 pounds of life insurance cover, the standard rate is 17.70 pounds per month.  If you drink between 45 and 60 units weekly it increases to 25.35 pounds per month.

In relation, it will cost a 25 year old non-smoker 18.70 pounds per month for 110,00 pounds of CIC . For a smoker this increases to 32.80 pounds per month, but the premium only rises again if you smoke over 40 a day.
**A family history of conditions such diabetes or heart disease does not mean that premiums will  be considerably higher.  A 35 year old physiotherapist,  Mr X, comes from a family that has many members suffering from diabetes although his sister and his parents do not. Last week, he and his wife took out life insurance and critical illness cover with Money Supermarket from Legal and General, providing them with a cover of 125,000 pounds.  Their monthly premium costs 38.50 pounds and Mr T was quite amazed that his families medical history did not influence what they pay.

A managing director of LifeSearch, Mr O, says if you can’t afford to do both, it is sensible to protect your mortgage with life insurance and then take out as much CIC as is affordable.

 ”Any one who can afford it should have critial illness insurance,” he says. “If you’ve got children you should have life insurance and critical illness cover. The only people who may not need critical illness are those with excellent, not just average, employee benefits.”

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