Adrian Garside

The ABI (Association of British Insurers) sets the manadatory definitions for Critiical Illness policies.

So, a Critical Illness policy will have 27 illnesses, all of which have a certian definition. Technically, that enables an IFA to advise on Critical Illness Insurance on a level playing field.

The problem for the insurance companies, is that if all illness definitions are the same, how do they fight for your business, other than on price.

Well, one way is for them to have a few extra illnesses – most insurers have more than just the 27 illnesses, most have over 30 and BUPA has the most at 39 (ignoring the Pru who have 100 and I’ll talk them about in a minute).

From there, I can run a list of critical illness policies, and then look for the best policy amongst the cheapest.

Another way, is to provide extra benefits – Bright Grey and AXA both have couselling services, advice services and BG even have MacMillan nurses available for cancer sufferers. So, if BG or AXA are amongst the cheapest, I’d recommend them over the cheapest ‘bog standard’ policy.

And, the latest way is the ‘ABI+’ definition. Bright Grey have just made another 3 (total of their 35 claimable illnesses ABI+ – meaning that the definition they use is easier to claim on than the ABI definition. So they say:

• Benign brain tumour – the requirement for permanent neurological deficit with persisting clinical symptoms will be waived if the benign brain tumour is surgically removed.
• Coronary artery bypass grafts – we’ve removed the requirement to use surgery to divide the breastbone.
• Heart valve replacement – we’ve removed the requirement to use surgery to divide the breastbone.

This isn’t just plain generousity, or market forces – take the last one, they hardly ever divide the breastbone these days, so removing this criteria makes sense.

So, now as an IFA, I keep an eye on the ABI+ lists…

Oh – I was going to mention the Pru – their serious illness list includes the ABI critical illness definitions, but also has 73 further illness that are claimable. In addition, many have ‘proportional payments’ so, for instance ‘total and complete blindness’ is the critical illness definition, but Pru would pay out half a claim for 1 eye being blind, or 10% claim for Tunnel Vision.

This policy is so far and away better, in my opinion, than regular critical illness insurance that I always discuss it with clients.

Mostly, when insurance companies tweak their definitions of illnesses, the differences are more technical than genuinely useful.

This is different.

Breast Cancer has by far the highest number of claims in the world of critical illness policies – the definition is usually along the lines of having malignant cells – here is a typical definition I’ve just cut from a brochure – “Any malignant tumour positively diagnosed with histological confirmation and characterised by the uncontrolled growth of malignant cells and invasion of tissue.”

That’s quite a high qualification level, and is pretty standard across all companies.

The news that has caused a ripple in my pond is this: Prudential have just added even more illnesses to their list that qualify for a payout and they have included Lumpectomy in their ‘proportional payout’ range.

So, any woman having a lumpectomy qualifies for a 10% payout on their critical illness cover.

Anybody thinking about buying a critical illness policy needs to look beyond the premium and give thought to the quality of cover they wish to take – for some clients the Pru are very cheap, but they are not always cheapest. It is very easy to see a league table of premiums and think all policies are the same so take the cheapest.

For me, the Prudential are very different, so for clients we need to consider the cheapest policy, but we also need to consider the premium with the Prudential and also the premium with Bright Grey who have some unique features to their policy as well.

I’ve been reading the figures published by Scottish Provident on their 2009 critical illness claims.

In order, here are the most common claims.

1. Cancer                                -  765 claims paid, average age of claim 46
2. Heart Attack                    -  144 claims paid, average age of claim 48
3. Stroke                                 -  74 claims paid, average age of claim 48
4. MS                                        -  66 claims paid, average age of claim 39
5. Childrens Critical Illness – 37 claims paid, average age of claim – 9

Now that list goes on for some time.

The top two illnesses are no real surprise. Number 5 is the one that will raise eyebrows.

Childrens Critical Illness cover is regarded as a ‘fringe benefit’ – probably becuase most policies offer it as a free inclusion.

However, where there are children, or I guess, there could be children, this needs to be at the front of an advisers mind – most policies provide cover for £15000 – £25000 per child, but recently I have recommended a policy where you can set the amount of cover for each child. In the example, we chose £44000 and it cost an extra £2 or £3 pm.

I was speaking to a client yesterday and she commented that she needed to tell the people who provide their life inusrance that her partner has diabetes. She doesn’t.

Life Insurance

For Life Insurance (and Critical Illness & Income Protection) they work on the principle that the information they hold on you must be correct at the time the policy starts.

So, if you applied last week, but haven’t started the policy yet, and something happens you must tell the insurance company. If you’ve started paying premiums already, and your health changes, well that is OK… I mean, from the insurance company point of view.

Usually these policies have guaranteed premiums for a set term. Some have reviewable premiums and if you are thinking of taking a reviewable policy out you should check that the reviews are age dependent only – so no health questions asked. They usually are, but check.  Avoid a policy that checks your health again part way through – it could become seriously expensive just at the point when you need it.

Catching up on Missed Premiums

If you miss a payment or two but really want to keep the cover running, the insurance company will ask you to complete a ‘Declaration of continued good health’ – complete this honestly – technically the inusrance has stopped and you are starting it again, so it is like applying again. If there is a fair time between applying for the insurance and starting it they will aslo ask for one of these forms to be completed.

For Life Insurance, if you are starting a policy again, then it’s worth casting around to see what premiums are like these days – premium rates are considerably lower than they were a few years ago.

For Critical Illness Insurance, the older policies are better than newer ones, so it is likely to be better to try to keep the older policy running if you can.

Car Insurance

When you renew your policy, car insurance companies alwasy ask you every details again – this is becuase they need to know. If you get a new car, get a speeding ticket, change your estimated annual mileage, mod your car, tell them – better safe than sorry.

Travel Insurance

If you pay for this annually and your health chnages, yes tell them. And if you plan on doing sports on holiday, tell them.

Household Insurance

If you buy new stuff that has value, tell them – better safe than sorry. Usually there are limits where they are uninterested, but as a guide I would tell them about anything you buy worth over £500 – you’ll soon find out if their limit is higher.

photo credit: Catholic Aid Assoc

LOL, I searched for ‘insurance’ on the royalty free photo website… this isn’t the kind of insurance I recommend, but I do know some who do…

Earlier today, someone found my blog by searching for ‘divorce critical illness payout’.

This is an awkward topic, as an adviser, it’s tricky to raise this as a subject with a married couple, but it is something that affects my advice. And later, in the event of divorce, it is even more awkward.

With most insurances people decide which one wants to keep the policy (if either do) and the other signs away their interest in the policy – with life insurance this is quite common and endowments as well, usually there is an exchange of cash as well when it’s endowments. Pensions as well, in divorce can be split according to the agreement made by both parties.

With most joint critical illness policies it gets complicated. A joint policy will usually pay out once only – on the 1st event of either Mr or Mrs Smith becoming critically ill and then the policy stops. They usually pay out on death too…and then the policy stops.

So, we have considerations:

Firstly we have ‘old definitions’ – old policies have illnesses that used to be critical, but as medical knowledge has progressed those illness have become run of the mill and not critical, or if it’s not the illness itself, the definition is ‘claimable’ at what is now a non critical stage. Essentially, old policies are better than new.

Secondly we have the money issue – someone has to pay the premium, and they will expect the pay out. This is not a problem in the event of death of the other party, that will still be a payout and I don’t suppose anyone will contest it. And it’s not a problem if the payer becomes ill, they’ll just take the payout. But what if the other person becomes critically ill – proving they are ill will require their co-operation.

There is a partial solution – some companies will split a policy in the event of a divorce – although some require medical evidence to be provided and so may decline one party or the other and some also required a new mortgage to be taken out. If it’s happening to you, this is worth investigating.

If this isn’t an option, then I suggest you make your agreement at the time of the divorce – negotiating cash payouts on a partners critical illness is never going to look ‘seemly’.

For me, I usually recommend 2 single life policies, I explain this is because there is potential for 2 payouts. This is another ‘background’ reason though.

The ‘Man from the Pru’ no longer visits customers, he visits IFA’s and he’s just been to see me. Not today, you understand, it’s 7am as I type this – I saw him last week.

They have added ‘healthcare’ to the options on their ‘all in one’ insurance policy. My interest was mild, Healthcare is a pretty complex subject and there are many policies to choose from specialist providers and I wasn’t inclined to think he’d tell me anything that wouldn’t be revealed by running a search on my software.

But he surprised me.

They have the usual options – range of hospitals, range of cover etc and when I am looking at these options, I would put the Pru into competition with the usual providers and they would have to stand on their own two feet.

But they have an addition option that did tweak my interest.

It’s Private Health Insurance that just covers Cancer and Heart attacks. Now, the NHS are very good at Cancer and Heart attacks, from what I gather, but, good as they are, they have budgetry restraints – for instance Herseptin isn’t on the NHS, but is provided on this policy if appropriate – and the hospital experience is better when private, just by the very nature of things.

And this cover can be cheap – I was just running off quotes for a couple (him 40′s, her 30′s)  who wanted Life and Critical Illness Insurance. I added this Cancer and heart attack cover and the additional cost was £28. The cover is cheaper when run side by side with serious illness cover than if it’s stand alone because they cross subsidise the cover.

It seems to me that if you are interesting in Private Health cover, but have always found the premiums daunting, this is an ‘entry level’ product that is worth considering. Talk to your friendly neighbourhood IFA.

photo credit: @thewtbOh yes…it says so in The Mirror. If it says so in the The Mirror, it must be right.

But hang on, it says so in The Telegraph too…it’s even better in the Telegraph – they say “that scientists have found men suffer from flu more because they “invest in their spirit of adventure at the expense of their immune system”.

That’s me all over!

What is going on is that some boffins at Cambridge University set up a mathematical model that looked at the probability of ‘Man Flu’ existing and they say that “if males are more exposed to infection than females, perhaps through riskier behaviours, it is possible that they evolve less effective immune systems”. They say that this result is at “odds with intuitive expectations”.

So, mathematically, there is a chance that man flu exists, but it’s not yet scientifically proven.

Well, as my fans will know, I like maths. I think this research is bang on!

For those who want the less biased details – here’s the link to the NHS website – http://www.nhs.uk/news/2010/03March/Pages/Man-flu-myth-or-real.aspx

There’s a question on one of the trade websites – I think it was ‘Mortgage Introducer’ asking if IFA’s provide a better service than standard mortgage brokers.

Well, I was a mortgage broker, and now I’m an IFA.

Service – hasn’t changed – I still do my best – I offer the same advice, albeit with a better range of products – I still take it personally when a lender messes up, I’m even worse if I do!

Product range – I think this is the difference, and it’s not all to do with the mortgages. I’m a member of alot of mortgage clubs so have a decent range of exclusive deals available to me – some brokers may not have access to so many. Also, some brokers only have access to some products in theory – I know one company that tells their brokers that they can use any lender they like. But they have an approved panel and the broker gets no commission for going off panel. Guess how many times they need to go off panel.

But, for all the related insurances it makes a huge difference. For instance, the other day I quoted Buildings and Contents Insurance for somebody. There was going to be a charge if they used a product away from the lender, so we needed the premium from the lender first – £59pm. I could get it for £43pm elsewhere.

£16pm saving.

And you can see similar savings on all types of insurance between a cheap provider and an expensive one. And, I don’t recommend policies where the cover is compromised. Quite the reverse.

Most people get paid if they are off sick,

Average seems to be about 3 months pay, good is six months and excellent might be something like six months full pay followed by 6 months half pay.

After that you are on your own. Well, not quite on your own, if you qualify, you may get Employment and Support Allowance, although £95 per week doesn’t go as far as it used to. And there are other bits and bobs that may come your way, say, if you are a family and your partner works, you may get tax credits or even carers allowances.

The Government know that 3 out of every 10 of us that work will become disabled before we are 60.

Wow. You’d have thought that would mean an insurance that replaced your wages if you were off sick would be in serious demand wouldn’t you? After all, it’s a fair bet that you’ll claim and the consequences if you don’t have the insurance are…well, pretty close to a life of poverty.

So, why is this insurance not flying off the shelves?

2 Reasons

1. You think it’s going to be expensive.

2. You think you have it in your Accident Sickness and Redundancy cover with the mortgage.

Lets start with number 2 – the accident and sickness in that style of policy only pays out for either 12 or 24 months. Really it should pay out to age 65, which leads us to point 1.

If it has to pay out to age 65 isn’t it going to be crazily expensive?

Well, no, not really.

It would be if you are a lumberjack or a stuntman, but for someone with an office job or a sales job it can be quite cheap. What do I mean bu quite cheap?

Well, it’s not uncommon to quote premiums lower than £20pm.

Obviously it depends on your job, your health and how long your sick pay lasts as well as a few other details, but this is probably the best value insurance policy you can get.

Call press ‘Call back’ and I’ll give you a quote.