Over the years, I’ve written many an article about the failings of financial protection insurance. More articles than years lived on planet Earth.
Cover sold on the basis of coming to your financial rescue in your hour of need when a serious illness or accident strikes, but then not doing so for some technical reason only the insurance industry understands.
For example, there was the case five years ago of Hein Pretorius who was refused a payout even though he had lost a leg in a motorcycle accident.
The insurer’s excuse was that his injuries were not sufficiently horrific. Only two lost legs qualified him for a payout. Outrageous. Enough to make my blood boil.
Enjoying life again: Emma Thomson has bought a cocker spaniel, Mollie, to keep her company
Then, there was the case of Andy and Alistair Macpherson who – 15 years apart – were refused payouts from their protection insurance policies even though both were diagnosed with bladder cancer.
It was only a result of Andy’s bloody-mindedness, a little bit of coverage from the MoS, and the support of brilliant medical experts that the decisions to decline their claims were overturned. Right result in the end, but it shouldn’t be that way.
People with insurance cover shouldn’t have to jump through hoops in order to get a claim met. If they suffer a serious illness, the policy should pay up. End of story.
Thankfully, the insurance industry has slowly woken up to the fact that unless financial protection insurance is seen to deliver on its promises, the product will wither on the vine.
So it’s brought to an end the outrageous practice of trawling through people’s medical histories in an attempt to find a reason why a claim should be declined on spurious non-disclosure grounds, even though medical non-disclosure is usually accidental rather than deliberate.
Instead, people signing up to such cover are now encouraged to disclose before signing on the dotted line.
It also explains why many – not all – insurance companies now publish their annual claims data in an attempt to prove that in more than 90 per cent of cases, they pay up.
Of the three main forms of insurance, the uphold rate for life insurance claims is understandably the highest.
Flashback: Our story in 2013, one of many where insurers would not pay up
For critical illness insurance, where a lump sum is paid on diagnosis of a serious illness such as cancer or a stroke, it’s lower – but still above 90 per cent. The same goes for income protection – where a monthly income is paid if the policyholder is unable to work as a result of a long-term illness.
Of course, the ’90 per cent’ are rarely vocal about how their cover has come to their financial rescue, keeping the household finances ticking over while they recover from their illness.
Most (understandably) simply don’t want neighbours or friends knowing about their good financial fortune. It means the cover gets more of a bad than good press (guilty m’lud).
Indeed, a new claims charter being drawn up by a mix of consumer representatives (including yours truly) and protection practitioners urges insurers to bring their cover to life by including real-life stories of people who have made successful claims.
HOW MUCH DOES THE COVER COST?
Someone buying £100,000 of combined critical illness and life cover will pay between £14 and nearly £80 a month in premiums, depending on their age, type of policy and the provider they opt for.
So a 30-year-old looking for cover until age 65 will pay between £29.63 (Zurich) and £45.18 in monthly premiums, fixed for the policy’s term.
This assumes they are a non-smoker and have no pre-existing health issues. But a 45-year-old would pay a minimum £63.30 (again, Zurich).
Many people buy cover in tandem with purchasing a family home and taking out a repayment mortgage.
In this instance, they usually opt for a policy that decreases the amount of cover over time, in line with the shrinking size of the outstanding home loan. A 30-year-old could get such cover from Zurich for £13.66 a month while a 45-year-old would pay £39.89 (Aviva).
All figures from financial protection insurance specialist Highclere Financial Services – highclerefinancial.co.uk.
Last week, I spent an hour with someone who has just benefited from the financial safety net provided by protection insurance. Single, she is unsure how she would have coped without it as she battled against breast cancer.
Emma Thomson works in insurance with British Friendly, a specialist in income protection, so she knows that protection cover has more virtues than vices. It explains why she took critical illness policies with AIG and Aviva – £160,000 of combined cover.
Last April the 44-year-old, who lives just outside Lincoln, noticed a change in her left breast – her nipple had inverted. Doing a little research on the internet, she realised that it may be a sign of breast cancer. Her GP referred her to Lincoln County Hospital for a mammogram and biopsy.
Afterwards, she was directed to a room adorned with a soft sofa and cushions. ‘I knew straightaway I had cancer,’ she says. ‘I was sitting in a room designed for those about to receive bad news.’ She was right.
Although it would take a while for the initial diagnosis to be confirmed, she had stage two (fast-growing) invasive breast cancer.
Holders of critical illness insurance shouldn’t have to jump through hoops to get paid
Within weeks, she had undergone a lumpectomy and had her left nipple removed as well as lymph nodes from her left armpit. Twenty three sessions of radiotherapy followed, along with a further operation to have breast reconstruction.
She is now confident she has conquered the cancer although she will be taking a hormone-reducing drug for the next ten years and will also have an annual mammogram.
Although her employer has been brilliant throughout, it is the two critical illness policies that gave her financial security at an uncertain and unsettling time.
The Aviva policy, set up in 2011 and costing just over £13 a month, paid up almost immediately. The AIG policy took a little longer because she only took it out in October 2018 – a trigger for an insurer to check that the policy was not set up with any prior knowledge about the cancer.
Although the Aviva policy has now lapsed because of paying up, the AIG cover remains in force, albeit in pared back form – covering her against any future loss of earnings as a result of a serious illness. This costs just over £67 a month.
Her encounter with cancer has changed her outlook on life. She’s joined the local cancer support group ‘Be and Become’ and is planning to celebrate in style her forthcoming leap year birthday (her 11th) in a local gin and wine bar called the ‘Pessimist’. She has also bought a cocker spaniel – Mollie – to keep her company.
‘I feel so lucky,’ says Emma. ‘I’ve come out the other end of my cancer journey and I’m determined to enjoy myself.’
Although she has used some of her claim money to pay down her mortgage, and put a little aside for a rainy day, she has also purchased a VW camper van so that she and Mollie can go on trips together. As she jokes, ‘three Cs in a year’ – cancer, camper van and cocker.
‘Financial protection insurance isn’t sexy,’ says Emma, ‘and, of course, you can go through your working life without making a claim. But it’s a financial comfort blanket, and when it does kick in – in my case at a time when I couldn’t drive, I couldn’t wash my hair, I was searching for expensive mastectomy bras and I felt at my lowest – it’s a financial godsend.’
Food for thought. And good to report a positive story about protection insurance for a change.
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