Serious illness policies are still a relatively small part of the overall protection market - hovering below 10 per cent of the insured population, but they are growing in popularity, especially as a means of additional mortgage protection cover. (Building society surveys claim that half of all new mortgages are covered by serious illness policies or a combination of life/serious illness contracts.)
The market is extremely competitive with 11 life companies vying for the available business, mainly by bringing on stream additional - and it must be said, rare - life threatening illnesses or surgical procedures to attract new policyholders. In the case of Canada Life, they have even gone a step further this week by making provision for post-diagnosis counselling for their beneficiaries. Canada Life, the original and still the largest provider of serious illness cover has relaunched its product this week, renaming it the Protection Options Plan. In addition to its standard list of major illnesses and conditions (such as cancer, heart attack, stroke, MS, kidney failure, etc), it has added 11 new diseases to its list. These include bacterial meningitis, major head trauma, chronic liver disease, systemic lupus erythematosus, CJD, AIDS/HIV as a result of physical assault, latter stage Alzheimer's Disease (before age 65) and latter stage Parkinson's Disease (before 65), severe rheumatoid arthritis, chronic lung disease, and muscular dystrophy, a disease that strikes young children.
Its benefit package has also been improved across the board with accident, surgical and automatic children's benefits all being increased. They have also extended the geographical cover limits to include a number of other countries previously excluded.
This now means that if you move to Japan, South Africa, Iceland or Singapore or the Czech Republic, you will be covered should you contract one of Canada Life's listed conditions. What makes this revised contract stand out however, is the provision of a free-counselling service to beneficiaries. The company says it now has a body of evidence to show a need for postclaims support for its clients, most of whom have been traumatised by the diagnosis of a life-threatening illness or condition.
As a result they have put in place a telephone-based support service provided by Europ Assistance, which will provide a panel of trained psychological counsellors, specialising mainly in stress management and depression counselling. If it is deemed necessary, face-to-face counselling can also be arranged, but initially the telephone service will be available for up to two hours. The service will be available to each client up to two years after they have made a claim. There is no extra cost for this service.
Additions and improvements to critical illness policies need to be examined carefully and buyers need to keep in mind that the vast majority of claims relate to the main illnesses covered. Virtually all of Canada Life's payouts since last year have been for cancer, heart conditions, stroke and multiple sclerosis, mirroring exactly the conditions which affect the mainstream population. The bells and whistles attached to these policies are attractive marketing tools, but should not necessarily influence a purchasing decision.
It is also important to understand exactly how these policies work: as whole of life savings plans, there is only a very small maturity value and there is a danger of bombing out unless you arrange the contract on a guaranteed premium basis. Canada Life guarantees that their level premiums will provide the agreed amount of serious illness cover for the first 10 years after which time there will be a review and premiums are likely to go up, unless the underlying investment fund produces a steady 7 per cent compound growth return. In that case the initial premium should provide cover for 22 years. A good, independent financial adviser should be able to provide you with a proper explanation of the contract and its prospects.
