Looking at the insurance that protects your family from loss of your income
SOMETIMES we spend too much time thinking about the past, and we don't think enough about the future, because it's harder to imagine.
Which brings me to my case history for this week. A client was unexpectedly rendered unable to work lately, when he was struck down, and had to be confined to his bed, by a serious illness.
He told me how suddenly his world changed. One day he woke up in the morning feeling as right as rain, and just five hours later his wife was on the phone for an ambulance. Sometimes you can't help but get the feeling that God is taking the … making fun of you.
Luckily, this clever man had previously asked me to sort him out with the insurance that protects your family from the loss of your income, if you fall seriously ill. His critical illness (CI) policy, which in his case was set to provide a tax-free payment sufficient to pay off the remainder of the mortgage, took care of a serious burden, at what would otherwise have been a very difficult time.
You don't have to specify what the money is for. There are many cruise lines now that don't mind hauling you on board on a stretcher.
Anyway, he said he was so lucky he had chosen to take out CI, as his daughter was soon to be off to university, and relieving the pressure of the mortgage payments left him in a position to help her to do that. These are the things you don't think of.
Critical illness is a type of insurance where, perhaps more than with any other, proper advice is essential at the application stage. Why? Because the world of critical illness insurance really is the world of small print. Although I have to say that, in fairness to the big insurers, they are human beings (most of them) and they are very good at paying out.
Here's how it works. When you take the policy, the insurance company may not ask to see your medical records. but when you have to claim, they will delve deep into your medical history. What many people don't know is that you also have to declare possible hereditary conditions. This would include the mild heart attack your dad had, and which you might genuinely not have known about, because these things were often not a subject of conversation around the dinner table.
In addition, you are more likely to inherit a health condition from mum than from dad (let's face it, she did most of the heavy lifting in the months before you were born) and you need to ask a few questions there too, or at least ask around.
Every critical illness provider and every policy have their own defined range of illnesses, terms, conditions, and – this is the one to watch - exclusions.
This is why choosing an independent financial adviser, who has been around the track a few times, and is free to choose from the full range of policies on the market, can bring concrete benefits to you.
It is also worth taking advice on how comprehensive cover is, for each critical illness policy.
The core conditions of cancer, heart attack, stroke, kidney failure, major surgery and multiple sclerosis are covered by most providers. If you're into value for money you could get all five, but I wouldn't – one will do.
Other conditions such as angioplasty are sometimes not covered any more, as medical advances have made what used to be a major procedure into a relatively minor one, requiring only a short stay in hospital. You just need to know what you're covered for, and what you're not.
As my client discovered, if the unexpected happens, you might be glad of it.
:: Michael Kennedy, an independent financial adviser and pensions specialist, can be contacted on 028 71886005. More information on Facebook at Kennedy Independent Financial Advice Ltd or at www.mkennedyfinancial.com