Critical Protection Issues - Part 3

This is the third of three posts on protecting your family from the effects of death and illness. A morbid subject perhaps, but a crucial one that you shouldn’t ignore.

The first two posts can be found in the protection category on the right hand menu.

This last post looks at the claims experience of a major insurance company.

If you've done your research and have bought the right type of cover, there may still be a thought niggling in the back of your mind…

Will a claim be paid out and what is the claims experience of the company I've chosen?

Let's take a look at the claims experience of one of the major insurance companies, Norwich Union, for critical illness.

Remember, critical illness is designed to pay out a lump sum on diagnosis of a number of conditions.

Even though you've committed to paying out every month for your cover, we all like to think 'it won't happen to me'.

History tells us different.

According to Cancer Research UK one in three people will be diagnosed with cancer during their lifetime and approximately 35% of people diagnosed with cancer are aged under 65.

But don't be mistaken thinking that it's those nearer 65 who are diagnosed. In 2003, a massive 40% of Norwich Union's critical illness claims were made by 31 to 40 year olds. And 13% of claims were made by people under 30. (Children suffer too and the outcome can be devastating for all involved).

Surviving the diagnosis

With improvements in health and standards of living survival is the more positive side:

-77% of women diagnosed with breast cancer will still be alive 5 years later
-62% of heart attack victims will survive their condition
-70% of children with cancer will be successfully treated

In 2003, Norwich Union's claims experience was:

-64% cancer
-13% heart attack
-8% multiple sclerosis
-5% stroke
-3% total permanent disablement

The company paid out £49 million, with an average payout of £69,000. The average age was 40, split 52/48 male/female. 

For men, the most prevalent cancers are prostate, lung and bowel cancer. For women, it's breast, bowel and lung cancer.

One of the aspects of critical illness that is often missed is the impact a diagnosis can have on you and your family's lives.

There is no way you can predict the illness you may have, meaning you can't plan ahead. Will you need to modify your home? Will your significant other need to care for you? What impact will this have on you financially?

So it can be difficult to decide how much cover to get. Whilst we can't give you the answer today, it's something you should think about.

Claims

Let's look at some of Norwich Union's claims from 2003:

Testicular cancer, Male, Age 22, payout £60,770
Multiple sclerosis, F, 23, £61,000
Breast cancer, F, 41, £160,250
Heart attack, F, 51, £110,000
Pancreas cancer, M, 51, £200,000    

The Key Considerations

Buying the right protection cover is the first step of any successful financial plan. You MUST do your research and remember that the cheapest policy may just be that, cheap.

Always read the small print before you sign up as, unlike car insurance, your strategy should be to keep your cover in place for many years with the same company.

If you've got any comments about protection issues, feel free to leave your thoughs in the box below.