Looking back to when I started my career, some 13 years ago, I remember my old employer insisting we used a "presenter folder" that had different facts about illnesses and pictures of pensive looking people.
We asked people to imagine, "you had been involved in a car accident!" or "you are in hospital and have been diagnosed with cancer!" The aim of this pretty brutal approach was to get people to think about how critical illnesses or injury would affect their routines, their family and their income. What choices would they have to make?
I can see some value in this approach, after-all, the only other time you are likely to think about this is may be when it's too late and and something has already happened. For many people, this type approach to talking about insurance is dated and off putting.
In my view, an adviser needs to have access to a wide range of different companies to help meet a customers needs. I also prefer to talk to people about the options open to them, to give them advice, rather than scare them half to death!
Whilst insurance may not be the most interesting of subjects, something did happen a couple of years ago that was a massive eye opener for me.
Many people are familiar with Critical Illness Cover or Trauma Cover. This provides a lump sum of money in the event of someone suffering a particularly nasty illness. Critical Illness cover was invented in 1983, the same year the mobile phone was invented!
Insurers cover, on average, 34 illnesses. Of course, the insurers give a definition for each illness which means you will need to meet the definition to be able to make a successful claim.
Let's say someone is in a car accident and is blinded in just one eye. That's pretty serious. Maybe you would expect this to be covered by a Critical Illness Plan. Sorry, it's not, you need to be completely blind!
What about claiming for cancer? Most Critical Illness plans taken out since 2007 will not pay out for low grade prostate cancer in men or mastectomy for breast cancer.
Insurance is absolutely useless until the point you come to claim, that's when you want the reassurance that it's going to do what you thought.
The eye opener for me came with the evolution of Serious Illness Cover;
- Gone is the restricted list of 30 odd illnesses, replaced with a new longer list of up to 154 illnesses.
- Goodbye to the "all or nothing approach" to a claim. If you need to claim, there are six different levels of severity, the new plan is much more likely to result in payment of a valid claim at an earlier stage of an illness.
Of course, the proof that this type of cover is better can only really be evaluated at the point a claim is made. The eye opener for me came when we switched a client from a Critical Illness plan to the new Serious Illness Cover.
A year after switching, our customer contracted Multiple Sclerosis.
With his old plan, he would have waited for 6 months from the point the disease had affected his ability to move or affected his senses . With the new plan, he was able to make a claim upon diagnosis and received payment based on the severity of his illness. If his symptoms worsen, further payments will be made until all the money in his plan has run out.
The customer was relieved he changed his plan over. He now has the ability to make choices; to pay his mortgage down, to set some money aside for medical care, to use some of the money to do the things he would want to do. He has an effective safety net in place and his insurance has done the job he wanted it do.
Mobile phones look very different now to how they did in 1983. Maybe your Critical Illness cover is stuck in the eighties?
If you would like to review your existing plans, or you need some advice about how best to protect you and your family, talk to Oak Tree Mortgages. We can talk to you by phone, at our offices in Shirley or visit you at home. Call us today on 0121 733 8833
Oak Tree Mortgages are authorised and regulated by the Financial Services Authority.
To cheer you up after reading this article, Oak Tree Mortgages are offering a meal at Giovvani's Restaurant in Dickens Heath for any customer arranging a new Serious Illness plan before 31st August 2010.
(A £60 dinning voucher will be given to any customer arranging a new plan through Oak Tree Mortgages prior to 31st August 2010. The voucher will be sent once the insurer receives the first premium on the new insurance plan.)
