About 15,000 people are diagnosed each year as having some form of cancer. Almost half will be able to lead normal lives when they have recovered from their illness. But during and after treatment, patients who suffer loss of income are vulnerable to financial problems.
Cancer is only one of many survivable serious illnesses that people have to cope with and it is high up on the list of specific illnesses covered by serious or critical illness insurance. People with this type of insurance policy receive a lump sum if they are diagnosed as having a serious illness such as cancer, stroke or heart attack. The other more popular form of insurance designed to help counter the financial problems linked to serious illness or disability is permanent health insurance, known as PHI. This more expensive cover is provided by most of the life assurance companies.
PHI is a protection policy that provides you with an income if you are unable to work because of sickness or disability. All types of sickness and disability are covered by PHI policies. The important factor is that you are unable to work and part of your income - usually two-thirds - is replaced until you are fit to return to work.
The PHI monthly income is usually paid after the insured person has been off work for 13 or 26 weeks. The longer the deferred period, the lower the premium.
PHI has been available on the Irish insurance market, mainly through group schemes, for about 30 years but critical illness cover has only gained popularity via group schemes in the past four to five years.
Critical illness insurance is increasingly popular with individuals as opposed to group business. Last year, the annual premium income for disability insurance or PHI was £60 million (€76 million). Back-of-the-envelope calculations based on average premiums indicate that about 425,000 people have this kind of cover. Approximately 3,000 people are claiming benefits from life insurers because of a disability or serious illness, according to the Irish Insurance Federation. It is important for those taking out PHI to ensure that the level of cover is relevant to their occupation. Mr John McGovern, director of Beckett's Employee Benefit Consultants, said that a good broker will make sure that the policy is tailored to the particular occupation concerned. "Some policies only pay out if the insured is unable to carry out their own or any occupation," Mr McGovern said. Although the premiums on a policy with this kind of clause would be lower, the policyholder should be happy with the level of cover they are getting. If the person is unable to work indefinitely, the insurer will continue to pay out but Mr McGovern said that enforcement was stringent and claimants were required to undergo regular medical check-ups.
An expiry date for the policy is usually set at the start and tends to be retirement age. Mr Liam Ferguson of Ferguson and Associates brokers said critical illness and PHI policies were usually sold as part of a life assurance or mortgage protection plan. PHI is also sold as an additional benefit on a pension plan. It is also possible to purchase these policies directly as standalone products.
There are two options for setting premiums, according to Mr Ferguson. The policyholder can either choose a fixed premium for a certain term or opt for a renewable premium.
The longer the fixed term is the higher the premium will be. The rate of increase on a renewable premium depends on where the premium was pitched to begin with. Insurance companies are more likely to load premiums than decline cover if there is a family history of a hereditary illness. In a small number of cases, you may have to have a medical or the life company may ask your doctor for a medical report. If you have a pre-existing condition, such as heart trouble, there is likely to be some restriction in the cover. As with most financial products, it pays to shop around. In a survey of six insurance providers contacted for this article, Family Money found wide price differentials.
The price range of monthly premiums for a serious illness policy for a male non-smoker aged 30 is £23.85 to £28.92. The same cover for a female non-smoker is £30.75 to £38.75. In the older category, the difference between the sexes is even more marked. Cover for a 45-year-old non-smoker ranged from £79.82 to £117.09 for males and £74.04 to £118.63 for females.
There are differences between the level and type of cover offered by different providers so direct comparison on price alone is not sufficient to measure the best deal.
Illnesses covered vary from insurer to insurer and are listed in their policy documents but most companies cover the following: heart attack; cancer; stroke; coronary artery disease surgery; multiple sclerosis; kidney failure; motor neurone disease; blindness; benign brain tumours; loss of limbs; and severe burns.
See www.iif.ie for information booklet A Guide to Permanent Health Insurance and Serious Illness Insurance
