Life Insurance Cover – ABC

Summary
During the “Credit Crunch” Protection Insurance has been a useful product, will it become more popular? The right moves are at last being made by the insurance market. We hope they will be successful. This article gives you the facts.

Not manyexpert financial advisers would disagree that protection insurance should be the basis of most peoples financial planning whether it be guarding against the damage of early death, accident, long term illness or (particularly now with the arrival of the credit crunch), cover for unemployment.

Life assurance is rightly the bed rock of financial planning whether it be put in place to protect your home owner loan or supply a tax free lump sum for your loved ones in the event of your death. Regrettably, some other brands of protection insurance have a less enviable reputation. Payment Protection Insurance Cover has a reputation for being miss-sold and critical illness cover has formally suffered from extensive policy exclusions which allowed the insurers to refuse a huge amount of claims, even if they seem valid.

But last month a shimmer of light emerged when Norwich Union gave out its 1st 1/2 figures on the resulteffect of claims on its critical illness cover. These figures appear to imply that at last the problem of inadvertent disclosure of health particulars when the policy application is completed, is being resolved.

A little while ago critical illness insurance claims were being repeatedly refused on the merest suggestion that the client had omitted any slight medical detail – even a foot infection or a sore throat! According to the figures presented by Legal and General, their claim refusals have come down sharply from 6.5% the previous year to 1.6 per cent in the last six months.

How did this come about? LV, Scottish Equitable, Norwich Union, Scottish Provident, Axa, and Friends Provident  have launched a range of changes intended to diminish their refusal rates. They start off with an absolutely clear explanation of the importance of complete health disclosure right down to when they last visited their Doctor no matter how minor the reason. And some life insurance quotes such as Axa get a medically trained person to phone each applicant to discuss their medical history in more detail. Then when the insurance policy goes on risk, some insurers are telling again the insurance holders of the importance of full health revelation and giving them the opportunity of correcting or adding the details on their application form.

If the additional details are assessed as increasing the insurer’s risk, then the cheapest life cover insurance company will certainlywithout doubt put up the monthly payment – but that’s definitely far better than paying the original payment for years and then getting a claim refused.

The insurance companies should have taken action years ago as their slowcoach approach has dented the people’s perception of protection insurance. Nonetheless there is an definite need for protection insurance so let us pray that it achieves the status its so correctly justifies.

Summary
Commonly people in the street with critical illness insurance plans do not really apprehend how these policies work. There are appeals for tighter rules on the presentation of such insurance. Some people need more information on plans which best suit their individual needs.

The chief financial regulator expressed its worries a few years ago that hundreds of thousands of plan holders did not comprehend what their policies covered. Those worries remain.

The  Financial Services Authority, the city regulator said that industry data showed that insurers, including insurers, banks, financial advisers, and supermarkets often made negligible effort to establish if the insurance cover was appropriate and inadequate information was given to policy holders of how the plans operates. While most companies were working to adhere to enhanced standards, others continued to offer an inadequate service.

In the event that a stroke, heart attack, cancer or other listed life-threatening illnesses strike, critical illness cover, insurance pays out a lump cash sum. Usually, it is people who are worried about paying off loans or mortgages if they should be unable to stay in work, who buy these life assurance protection policies.

For cheap life assurance cover there are two types: where the monthly premiums increase over the years and those with a guaranteed fixed monthly premium. Figures from the Association of British Insurers (ABI) indicate that, in total, there are in excess of 4m insurance policies covering 12m policyholders. An average policy will pay out £68,000.

These “protection” policies have proved controversial. While they are sometimes very benefitial, these “protection” life insurance arrangements have proved controversial and commentators claim that not many policyholders make a claim. There are no figures available on the number of people claiming made contrasted with the total expenditure on the premiums. The Financial Services Authority review did show, however, that on average, twenty five per cent of the claims made are refused.

Recently, in one situation a policyholder was found to have with cancer but doctors could not say which one. The policyholder was regretably told it was unlikely doctors would know for certain until he was six feet under.

Until the specialist doctors could diagnose what type of cancer he had, his insurance company would not pay out. The claimant’s financial advisers appealed realising that should he die, the insurance company would pay out a life insurance plan worth 15,000 pounds rather than the critical illness policywhich was worth more than £85,000 as only one policy can pay out. The argument with the underwriters caused untold stress to the claimant. After a public fight, the insurer agreed with the client’s legal team and paid out on the policy.

The Consumers’ Association which publishes Which?,  said it thinks the situation is much more serious than the FSA claims and that sales of critical illness policies are at the centre of a mis-selling situation.

Michael Chunkline, principal policy specialist, says brokers, finance companies and commission-hungry advisers, saw a chance to make  a big pay off. He said Which? had said the mis-selling that was rampant in the selling of pensions and payment protection insurance and would be replicated in the critical illness business. His forecasts are on the back of complaints in amongst MP’s regarding the mis-selling of critical illness insurance plans.

Amanda Layling, the MP, says the Financial Services Authority’s study reveals there is a big risk that policies are being sold to the public who don’t understand what they are buying or who don’t even need them. The MP wants the FSA change its rules that would limit sales of critical illnes policies to financial advisers working under especially strict FSA guidelines.

Summary
It is always sensible to know just what you are looking for in the way of insurance cover as only you understand your own position.  We highlight what you need to be aware of and how to maintain it after you have it.

Ian Marsh, a Director of investments at Lancaster-based financial adviser Peel Townsend Financial Services, cautions that it is very shortsighted of people not to have Life Assurance and/or Critical Illness Cover as he maintains that life has two main hazards – either living too long and passing away too soon.  “Its absolutely vital to have some insurance cover in place – especially if you have got small childern,” he says. “These days you must  asemble your own little fortress because nobody else is going to do it for you.”

Greg Suttcliffe at Bestdeal says now is the ideal time to invest in such plans as there are some very competitive premiums around owing to the intense vying for business within the insurance market. “The cost of life cover has dropped – reduced by about 42% in four years. It has never been as cheap,” he says. “The critical illness insurance market paid out on eighty four per cent of claims in 2007 – rising from seventy nine per cent  the during the last year.”
Always check what insurances you already have before you take out any more.  Do you already have investment policies or does your works pension fund give you any other cover?

The best way to assess how much insurance you need is to calculate how much you would want to retain the same level of living over a year and then multiply it by 24 years.  The minimum amount needed should settle all debts and and leave a lump sum for your family.

Obtaining the best deal

When making a decision on your insurance cover it is very necessary to read the manual that many insurance companies have of the illnesses and conditions that they cover. It will catalog everything and should be clear-cut and simple to comprehend.  You will also want to look at the documentation of the crutial features of the policy which will incorporate all exclusions and benefits.

When a person takes on the responsibility of a home loan they are normally counselled to take out critical illness insurance but should look around and not just take the first insurance policy offered.

If you commence paying these premiums when you are younger they are considerably cheaper, very different to leaving it until you are older, when the policy increases quite markedly.

Cheap Life Insurance premiums can also be lowered by stopping smoking cigarettes.  Fiona Jackson, head of protection insurance at AxA Insurance says “Giving up smoking can save people a significant amount of money as well as hopefully bringing a longer and better quality of life.”

If you quit smoking cigarettes you can take off as much as a 1 3rd off life, critical illness  insurance and income protection insurance premiums because the facts that we now have proves that smoking can cause serious illness and aggravates any other existing medical conditions.

If your circumstances change you may have to alter your policy.

Never think that once you have bought your insurance policy that you can just continue with your life and think no more of it. constantly be very aware of the insurance cover you have and be sure that, should your situation change, or, are going to alter your insurance must have capacity for these revisions.  Clear examples are changing jobs, or do you intend to have more children; often think about everything that may escalate your living costs and will need to to be covered if you are taken ill and cannot work.