When talking to clients about long-term insurance which includes life insurance, disability, dread disease and income protection, the conversation tends to be rather morbid. The purpose of these conversations is to determine the financial impact of your death or disability on those who are financially dependent on you. Although it may not be necessary for each person to have life assurance, income protection, lump-sum disability & critical illness cover, it is important that you have the adequate cover for your financial needs should one of these unfortunate events impact you.
For many clients long-term insurance feels like a grudge purchase but as is the case with most types of insurance, it is probably the worst “investment” you can make until the day you need it. Annually insurance companies publish their annual claim reports and I want to share some of the findings by PPS with you for the year ending 2018.
Claims for severe illness increased by 34% year on year. Cancer accounted for more than 50% of claims in this category, followed by disease of the cardiovascular and circulatory systems. Cancer claims are up 7% compared to 2017 and there has been a steady increase over the past 4 years. It is concerning to note is that cancer was the leading cause for claims on severe illness for members under the age of 35. The “Big Four” conditions (cancer, heart attack, stroke and coronary artery bypass graft) therefore made up for 73% of claims paid.
Temporary disability income cover:
Most claimed for conditions were diseases of the musculoskeletal system and connective tissue e.g. rheumatoid arthritis, scleroderma and lupus, injury and cancer. Just under 20% of claimants are below the age of 40, with the average age being 52 years. The youngest member was 23 years old and the oldest 83 years old.
Permanent disability income cover:
This is a progression from the temporary disability income benefit, claims increased 13%, from 2017. Psychological illness, diseases of the musculoskeletal system and injury, were the top three conditions claimed for.
Lump sum disability cover:
Diseases of the musculoskeletal system, psychological illnesses and injury, accounted for 54% of all claims, with cancer following closely behind at 15% of all lump sum disability claims. The youngest claimant was 33 and the majority of claims were from members aged between 61 and 67 years. Neurological conditions, injury and cancer made up more than 67% of claims in the last year.
Compared to previous years, motor vehicle accidents were not the leading cause of death among our young members, but rather cardiovascular diseases. 39% of death claims were for members between the ages of 41 and 60, followed by those between 61 and 70.
Reviewing and understanding changes in claims statistics is an integral part of our role as financial advisers to ensure our clients have cover that is: Up to date – insurers will upgrade products from time to time and it is important that you have the latest cover options on your policy. This is why it is important to review your risk cover at least once a year.
Not be underinsured – the risk of being underinsured is that should you pass away, become disabled or be diagnosed with a severe illness that you and/ or your beneficiaries will not be able to maintain your current standard of living.
Not be overinsured – although there is no real “risk” when a client is overinsured, it does mean however you are paying for cover that you might not need or that the insurer will not honour (in the case of income protection where a greater income than what is currently earned is insured).
Over and above annual reviews, there are certain events that might require us to review your current cover these include (but not limited to):
Changes in your health, for example if you lost a significant amount of weight or stopped smoking in the past year. This might lead to an adjusted and reduced premium.
Getting married, this will mean a change in the beneficiaries of your policies as well as changes to your dependants.
Buying a property, banks in most cases require collateral when you purchase a house. Taking out a life insurance policy reduces the risk for the bank but beware of the policies they offer as these policies often do not require underwriting and can come at very high premiums.
Having a baby, this life event has a direct impact on those who are dependent on you. Ensure to review your life cover in order to ensure that your family are provided for financially.
Change in your income, if you do not keep your policies up to date it could mean that you become underinsured. Significant changes in your income will trigger a review of your cover.
Getting divorced, similarly to getting married should you get divorced this will require a review of your beneficiaries and dependents.