Insurance in case you don't die
INSURANCE is what you need in case you don't die. If this sounds odd, then allow me to explain.
May is the official Stroke awareness month, and then on May 17 we have one day officially nominated as Hypertension Day, with free blood pressure testing in pharmacies.
It's a good time to reflect on whether we should be thinking of insuring our health, and the financial wellbeing of our family, against the arrival of some unexpected and severe medical setback.
In other words, insurance in case we are struck by some severe ailment, but don't die. The answer, of course, is Critical Illness Insurance, or ‘CI'.
CI covers you against the most common forms of severe health problems: heart attack, stroke, cancer, MS, or major surgery. There are many policies available, most cover much more than these core conditions.
I like to think of CI as covering, not your health, but your income and wellbeing when your health fails.
Figures from the National Statistics Office tell us that more than half of us will get some form of cancer in our lives. Then there's the other big health problem, heart disease. Seven million people in the UK have a heart and circulatory disease, with an average of 545 each day suffering a heart attack.
Cancer, stroke and heart attacks account for 80 per cent of critical illness claims to major insurers. When you add in MS, Alzheimer's and motor neurone disease, you've accounted for 90 per cent of all claims.
What if it were to happen to you, or more importantly, you and your loved ones? The Association of British Insurers (ABI) tells us more than 60 per cent of working families would lose over a third of their income if the main earner had to stop work, and four in 10 would see their income drop more than half. See what I mean about insuring not your health, but your family's welfare?
And as you lose your income, there are hidden costs of critical illness. The cancer charity Macmillan has shown that while cancer sufferers lose £860 a month in earnings, most see their monthly expenses spiralling at the same time.
Falling seriously ill will, Macmillan say, eat up £270 a month in treatment-related expenses – such as travel costs for appointments, hospital parking, increased heating bills, and the cost of certain over the counter medications.
Is covering yourself against the reasonable chance of a stroke of bad luck suddenly beginning to make sense?
Research by the major insurers has shown us that a quarter of men and a fifth of women will have a major health setback during their working life. However, only 1 family in 10 have critical illness cover (11 per cent).
In the past, there was public mistrust of insurance companies offering CI, with people saying that getting them to pay out was like pulling teeth.
The numbers show that nothing could be further from the truth. In 2015, for instance, 98 per cent of CI claims were paid, according to the ABI. Just to look at one large provider, Legal & General paid almost 93 per cent of its critical illness claims the following year, in 2016, shelling out a total of £181m to grateful and convalescent customers.
Now as I mentioned, there are many CI policies and many questions you need to answer, in order to know which policy is right for you. Do you need the tax-free lump sum from CI only to pay off your mortgage, or do you also need to think about what you would live on later, if you were unable to return to work? Or factor in the ongoing cost of healthcare?
Surviving a serious health event is getting more likely with every passing decade. For instance, in the 1960s, seven out of 10 people struck by heart attacks in the UK did not survive. Today, at least seven out of 10 do survive.
It's a paradox. Although we are healthier than ever before, we need critical illness insurance more than ever before.
“You don't buy insurance because you are going to die, but because those you love are going to live.”
:: Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005 . Further information is available on the Facebook page 'Kennedy Independent Financial Advice Ltd'