Your chances of surviving serious illness are good, but the impact on your finances and earning power can be severe
The possibility of contracting a serious illness is not a particularly nice topic of conversation, but one that is incredibly important to have nonetheless.
I’ve met many individuals who wish they had that talk before they fell ill, because they will tell you the financial implications for them and their family, of not having any form of insurance cover in place was significant. What savings they had, and the benefits they were in receipt of from the state, weren’t nearly enough. As a result, for some, the financial stress it created was nearly worse than the illness itself.
Irish Life released data at the beginning of the year, about the type and number of claims they paid out during 2017, and they revealed that cancer was the leading cause of serious illness claims (62%), with breast cancer being the primary culprit. They found the average age for a serious illness claim from women was just 51, and over a third of all serious illness claims came from people under the age of 50.
We are guilty of taking our health for granted, but there is no escaping the facts which suggest one in four of us will develop a serious illness during our lifetime. You are five times more likely to develop a serious illness during your mortgage term, than die, but how many people have serious illness cover attaching to their mortgage protection policy?
The good news is that if you do suffer a serious illness your chances of surviving it are very good. Your lifestyle may need readjustment, but having a policy in place will give you that time to recover more easily allowing you to focus on your treatment and recovery, without having to worry about how the mortgage or bills will be paid.
A serious illness insurance policy will pay out a tax-free lump sum if you are diagnosed with an illness that is covered under your policy’s specified illnesses. The most common form of illnesses covered are, heart attack, cancer, coma, kidney failure, Alzheimer’s, stroke, severe burns, loss of sight, surgery to aorta, kidney failure, major organ transplant, multiple sclerosis. Over the last number of years, the number of illnesses covered by a typical policy has increased dramatically with some companies now covering over 80.
There are two reasons, why I think you should consider taking out such a policy and they are:
1. If you didn’t have enough savings in place that would cover you for a reasonable period, of time (12 months’) if you were out of work and not earning an income.
2. If your employer didn’t replace your income in the event of your contracting a serious illness, which prevented you from working.
The cost of a policy will vary from insurer to insurer and will depend on the amount of cover you require, for how long, your age, your current health status and your family’s medical history. They will assess what your risk profile to them is and that will determine your monthly premium.
For example, the cost of a €100,000 policy for a 30-year old in good health, and a non-smoker, for 25 years, would be €30 per month.
Even though some insurers cover up to 80 illnesses, it’s important to understand what any policy covers you for, and I would get help in this regard.
Some policies come with exclusions, e.g. even though heart attacks and cancer are covered by all insurers, minor heart attacks or early stages of some cancers may not be covered (some companies won’t pay a claim for cancer until it has reached a specified stage).
Some forms of cancers are excluded altogether because they are seen as easily treatable.
Other illnesses may be excluded because of a pre-existing condition, or if there is a history of one in your family. You need to know in advance what is and isn’t covered and it can be complicated, so it’s best to reach out to an expert.
The amount of cover you require will obviously depend on affordability, but you need to work out how much of a lump sum you need and for how long, and what you are going to do with it.
Once you know what your expenses will be for, say, the next 12 months, and you know what savings you have and what income you will be in receipt from either your employer or the state, you will get a good idea of how much of a lump sum you will require for you and your family to maintain your existing lifestyle if you were diagnosed with a serious illness.
If you are looking for a quick number though, I would recommend cover equivalent to two years’ gross salary.
But, if that’s too expensive, don’t be put off, because some form of cover is better than none, at all. And don’t just focus on yourself either. How would you cope if your partner became ill? So, consider a, policy that would cover both of you.
Liam Croke is MD of Harmonics Financial Ltd,
based in Plassey. He can be contacted at firstname.lastname@example.org or www.harmonics.ie