Insurance Helpline | Assessing the need for critical illness insurance
QUESTION: I recently returned home to Jamaica after a period of five years in the US, where I attended college and worked for a while. I occupy a senior management position with a well-known company. My employment package includes all of the usual benefits, including health and group life insurance. At the present time, I am single and do not have any children. Is critical illness insurance something that I should be considering?
- B.C.B., Kingston 8
INSURANCE HELPLINE: The country's health-care system, to quote Minister Christopher Tufton, "is already burdened". The Jamaica Observer recently reported that "doctors in the public-health system are working between 90 and 120 hours per week" for low wages.
When these statements are linked to the conditions that contributed to the deaths of 18 babies by bacterial infection at two public institutions in 2015, it is clear that the minister's description of the state of affairs is probably an understatement. As a former prime minister stated: "It takes cash to care."
The need for critical illness insurance should be broadly examined in the context of these issues. I would have liked to know if your question was triggered by a recent newspaper advertisement - which, were I an employee of the insurance regulator, I would have rejected.
There are mountains of information out there in relation to the subject. Google, for example, lists 18.5 million entries. It should also be said that some purveyors of information about critical illness insurance use scare tactics to induce consumers to buy the product in the absence of proper analysis. Their goal: to meet sales targets and earn commissions. Readers of this column know that failure to conduct proper research and ask questions before signing on the dotted line is a no-no.
The UK Citizens' Advice Bureau (CAB) offers sound, independent advice on its website: "Critical illness insurance provides you with a lump sum of money if you are diagnosed with certain illnesses or disabilities. The kinds of illnesses that are covered are usually long-term and very serious conditions such as a heart attack or stroke, loss of arms or legs, or diseases like cancer, multiple sclerosis or Parkinson's disease.
"If being ill has left you out of pocket, it can be really handy to have a large sum of money to spend on things like everyday expenses, paying off your mortgage or your medical expenses. You can use the money in any way you like, you don't have to spend it on anything in particular. You may have other income coming in while you're ill, such as state benefits (which do not exist here) or sick pay from your employer. However, this may not cover all your needs. It's a good idea to think about how much you would need to live on if you became seriously ill and whether you would need some extra money to boost your income."
The bureau recommends that you ask yourself the following questions:
1. Do I really need critical illness insurance?
2. Is this the best type of illness insurance for me?
3. Do I have enough money to pay for illness insurance?
4. What are the exclusions on the policy?
It recommends, in relation to Item 1, that you check:
- Whether you already have some illness insurance combined with another insurance policy like a life insurance policy, or with your mortgage which covers you for serious illness;
- What benefits your employer pays out if you can't work because of ill-health or disability; and
- Whether you have savings you can use instead of insurance.
In relation to Item 2, CAB also says you should "check out all the different types of illness insurance to see which one would suit you best. For example, income protection insurance usually includes a greater range of illnesses and conditions than critical illness insurance and may cover you for a longer period of time if you can't work. However, it will probably cost you more than critical illness insurance."
Critical illness insurance costs can be quite expensive. You may never make a claim. Would the cost of a DNA test to determine your exposure to these critical illnesses be less expensive?
In relation to Item 4, find out what are the exclusions in the critical illness insurance policy. I have never seen a policy without any exclusions.
A well-designed critical illness policy, when with a health insurance plan, can provide you with the ability to opt out of the local health insurance system in case things should go wrong - as sometimes happens.
- Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: email@example.com.