Protecting your finances through ill health
Looking at protecting your finances in the event of illness can be a nightmare for anybody but for the climber it can be doubly daunting. Not only do you have to consider which protection you require but you also have to find a company which will actually cover you properly.
Most insurance companies will simply exclude claims arising from a climbing incident. However, there are some who will offer terms. The underwriter will consider your experience, how often you climb what grade you climb to and various other criteria in order to offer terms. It is important that the underwriter fully understands the true extent of your climbing activities.
There are a number of suitable insurance products which will protect your finances but for long term planning consideration ought to be given to critical illness and income protection
Critical Illness Cover is an insurance product, where the insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the critical illnesses listed in the insurer’s policy document. Policies may be purchased by individuals either on Single Life basis, or on Joint Life basis in conjunction with a life insurance policy and also at the time of a residential purchase or re-mortgage. The reason for this is to provide financial protection to the policyholder or their dependents on the repayment of a mortgage due if the policyholder is diagnosed with a critical illness condition. In addition, cover is also arranged to provide financial protection to the family or dependents of the policyholder.
The policy may require the policyholder to survive a minimum number of days (the survival period) from when the illness was first diagnosed. The survival period used varies from company to company, however, 14, 28 and 30 days are the most common survival periods used. The contract terms contain specific rules that define when a diagnosis of a critical illness is considered valid for claim. It may state that the diagnosis need to be made by a Physician who specialises in that illness of condition, or it may name specific tests, for example ECG changes of a myocardial infarction, that confirm the diagnosis.
Critical illness cover was originally designed and sold with the intention of providing financial protection to individuals following the diagnosis of an illness deemed critical. The lump sum received from the policy could be used to:
Pay for cost(s) of care and/or treatment
Pay for recuperation aids
To pay outstanding financial liabilities, typically a Mortgage
Fund for a change in lifestyle
Critical Illness Cover is suitable for those concerned they may not be able to meet their financial commitments or maintain a reasonable lifestyle if diagnosed with a critical illness.
If you have a health issue then contact the Insurance Advice Service. They have an enviable track record in obtaining life insurance for people with problems such as Obesity, High Blood Pressure, Diabetes, Heart Problems and Cancer
Whilst some clients like the assurance of having a lump sum on diagnosis of a Critical Illness, other clients deem it necessary to protect their income in case they are unable to continue working as a result of illness or injury. Income Protection would pay a regular income in the event of you being unable to work through ill health or accident. The benefit is limited to a proportion of usual income and it is designed to pay for essential financial commitments such as mortgage repayments, car finance and household bills.
Income Protection is designed to protect both employed and self employed people and provides a regular benefit normally of up to 60% of pre-tax earnings (or profits for self employed) to help maintain important items of expenditure if illness or injury prevents you from working and earning a living. In order to qualify for benefit, the policyholder must be totally unable to perform their own occupation as a result of illness or accidental injury, this definition is called own occupation. Other options are available where the policyholder must be unable to perform an occupation suitable to them given their education and training, this definition is called suited occupation.
Income Protection plans often do not pay the benefit immediately once the policyholder is incapacitated, as there is usually a deferred period. This is the period of time between when the policyholder is first off work due to illness or injury and the commencement of benefits. The longer the deferred period, the cheaper the premiums become.
As you can see, both products are crucial in effective financial planning. Deciding on which product is relevant is subject to whether a lump sum payment is required on diagnosis of a Critical Illness, or whether replacing income using an Income Protection policy which provides a regular tax free income. Ideally both products should be considered as they both are designed to provide different benefits at the point of claim.