Serious illness cover secures fiscal health

WITH eleven different serious illness contracts on the market, choosing the appropriate one is not an easy task, especially when the terms and conditions can vary so widely. Competition means that a wider selection of illnesses are now covered and optional benefits like hospital cash plans and accident benefits are more common. The price of premiums can vary widely but the cheapest plan will undoubtedly mean fewer illnesses covered and benefits provided.

Dublin broker, Moneycare Ireland has recently produced a comprehensive survey of the 11 plans and a very useful newsletter, Guide to Serious Illness Cover. Noting that each insurance company claims it has the fullest range of cover and benefits, closer examination, says James Kavanagh of Moneycare, shows just how different each package can be "by having additional restrictions or conditions or get out clauses."

Serious illness policies are available either as whole of life or term contracts, but purchasers should ensure that any whole of life contract they buy, means what it says, and guarantees to maintain cover for the entire lifespan. The difficulty with many lower cost whole of life plans is that they suffer from the `bombing out' phenomena, because annual premiums are adjusted upward in line with age risk. The attraction of the whole of life policy is that further medical examination is not required as the policy-holder gets older, but they are more expensive. Term policies, on the other hand, are cheaper, provide cover for a set number of years and can be very suitable when families are young and earnings are at their highest.

The Moneycare guide notes a number of statistical reasons for buying a serious illness policy: one in five Irish people will suffer a heart attack, cancer, stroke or other serious illness before they reach age 65; a man under 40 has a one in six chance of having a heart attack, while a women in the same age bracket has a one in eight chance of contracting cancer.

"There is some good news," says the Guide. "As a consequence of improving medical treatment, the majority of people are now surviving a serious illness", including 75 per cent of heart attack victims. Sixty-five per cent of women under the age of 40 will still be alive five years after being diagnosed with cancer and over 90 per cent of stroke victims will survive at least five years.

The popularity of attaching relatively cheap serious illness policies to shadow the decreasing value of a mortgage shows how conscious people are of covering the major expenditure which arises in the event of a serious illness.

The most important feature to examine when choosing a serious illness policy, is the range and definition of the illnesses covered. The six core illnesses covered by each of the 11 companies are cancer, stroke, heart attack, heart surgery, major organ transplant and kidney failure. "Most policies will then go on to cover 20 or so additional illnesses such a paralysis, coma, loss of speech, benign brain tumour, blindness, multiple sclerosis, Parkinson's Disease and so on," explains the guide.

"The list of illnesses is ever expanding and each time an illness is added, the life company will usually cover existing policyholders for the new illness - but not always and this is something you should check when you take out a policy.

"The other important point to note is what is in the small print. In order for a claim to be paid, your illness must match exactly the definition in the policy conditions. It makes sense therefore to check the small print for any exclusions, or `get out' clauses."

The Moneycare guide briefly notes the main features of each of the 11 contracts, while the survey itself provides a comprehensive breakdown of all the illnesses covered, the level of children's cover included and the age limit of the children (a number of policies only cover children from age three to 18 years, others from age one) and the conditions under which benefits like hospital and surgical cash apply.

The differences between the products can be quite interesting: Friends Provident and Canada Life for example will cover 27 and 25 different serious illnesses and offer automatic Permanent Total Disability (PTD) to ages 60 and 65 respectively while Irish Progressive covers just 13 illnesses and an additional nine under PTD to age 60 years.

lrish Progressive and NZI Life are two companies which will not cover the contraction of AIDs from a needlestick or by blood transfusion while New Ireland will not pay out a claim for any serious illness if it is made "in the presence of HIV/AIDS or due to war, riot or self-inflicted injury or illness." Norwich Union, meanwhile has now decided to exclude any serious illness claims "due to drug or alcohol, deliberate neglect of health, or failure to follow medical advice."

Exclusions like this should set off some warning bells. Would someone who has been told by their doctor at some stage to lose weight, or quit smoking but didn't and suffered a heart attack or lung cancer, he denied their serious illness benefit?

Irish Life recently revealed that out of the 253 serious illness claims it has received from 1993 to the end of December 1996, 76.5 per cent of them have been admitted and paid, with just 10.5 per cent refused and 11 per cent pending. The most common illness for which benefit is claimed is cancer, at 50 per cent, followed by heart attack (23 per cent), coronary by-pass graft (8 per cent), multiple sclerosis (6 per cent) and stroke (4 per cent). Interestingly, nearly three quarters of all the cancer claims come from women.

Irish Life paid out £2.28 million in 1996 alone, with the average claim amounting to about £25,000. Of the 27 claims to date that have been refused, a third of them were rejected for of non-disclosure of an existing ailment with the balance rejected because the condition was not covered or the definition of the illness was not met.

Canada Life, which is considered the leading serious illness provider, and was the first to launch the product in Ireland, has paid out about £4 million in benefits to date. Their latest statistics from 1994 to the first quarter of 1997, show that the average policy was just 18 months in effect at the time of claim notification. A breakdown of claims by age show that 49 per cent of claimants were aged 41-50 years, 21 per cent were between 31-40 years, 18 per cent were age 51 or over, while 12 per cent were 30 or under. Cancer and heart attack accounted for 43 per cent and 20 per cent of claims respectively.

The Moneycare survey and Guide to Serious Illness Cover is available free by telephoning 1-850-253545.