Critical Illness insurance definitions

Sunday, 1st February 2009 12:17 - by Resident IFA

My day job as IFA (Independent Financial Adviser) enables me to meet many different people, all having different financial needs, wants, existing arrangements, goals, opportunity to reach their goals, view on life, etc. This aside, there are a number of key solutions, often product-related, in helping Clients accumulate, preserve, or provide wealth. I would put Critical Illness insurance (i.e. against Cancers, Heart Attack, MS, Alzheimer’s, etc.) in the latter category - a monthly premium leading to the provision of a sum of money in the event of the ‘assured’ person suffering one of the (policy) specified Critical Illnesses. All sounds easy and reasonable until now? Yes, however there may be a couple of things to consider before taking the sensible step of insuring against Critical Illness: 1. Critical Illness insurance is what I describe as a ‘dear hobby’. It will be in the region of 4 times the cost of Life insurance (dependent on gender, age, smoker status, medical underwriting, etc.)…but for a good reason. Statistically, you are far more likely to suffer a Critical Illness before, say, 65 than die. 2. The quality of cover. I am currently advising a Client who has a good budget to revise their Life insurance arrangements and gain a decent amount of Critical Illness insurance to boot. I could simply research the marketplace on the basis of who provides the cheapest cover, but this wouldn’t be doing much of a good job, would it? Instead, I have delved deeper into the cover with the aid of another research tool I have which eliminates inferior products, based on key criteria I specify. For me, the key criterion is the number of Critical Illnesses covered by the provider and their policy. The Association of British Insurers (ABI) has 23 key Critical Illnesses they define and approve. My research immediately eliminated providers that did not offer all 23 of these Critical Illnesses. Now, I appreciate you won’t have access to this research software, but you can help yourself, if taking such a policy, by carefully reading the ABI (website) definitions and comparing this with the different insurer’s Policy Conditions and Key Features documents. You can get more information on Personal Insurances such as Critical Illness Insurance in the relevant area of lse.co.uk's Personal Finance section. It also provides the opportunity to arrange cover via a 'Whole-of-market' Adviser firm. So, buy on quality rather than price wherever possible. I believe Oscar Wilde said that “Nowadays, people know the price of everything and the value of nothing”. Price is legitimately sometimes King, but I think he had a point… ============================================ A mathematical teaser to end with…If 2 is the first number in a sequence, 3 is the second, 5 is the third, and 7 is the fourth, what is the 7th number? The prize is giving yourself a pat on the back if you get it right! Until next time…