Saturday March 27, 2010

Preventing medical bankruptcy at old age

COMMENT
By CAROL YIP

ACCORDING to the United Nations’ projections, there will be about 1.2 billion people aged 65 years and above by 2025.

With numbers such as these, failure to address our health needs today could develop into a costly problem tomorrow.

As our affluence swells, our expectations of better healthcare, financial independence and a peaceful death increases.

But due to the high cost of healthcare, only a few can afford to become seriously ill.

While immediate concerns about rising healthcare costs and retirement fund structure require attention, fundamental long-term questions should not be neglected.

There is urgent need to address what will be very expensive demographic shifts within our lifetime.

The biggest risk

Unless you are among the lucky few with lifetime healthcare coverage, you may need to bear major medical expenses during retirement. Should you need assisted living while ageing, you would enter a whole new world of long-term financial pain.

Those who have seen it happen to family members or acquaintances know first-hand that the unpredictability of our personal health is the biggest risk in retirement planning. It is a nightmare that is unforeseen and rarely controllable.

According to the World Economic Forum 2009 report Transforming Pensions and Healthcare in a Rapidly Ageing World, the question of ageing societies from a perspective that integrates implications and solutions for both healthcare and retirement pensions was addressed.

In taking this integrated approach, which emphasised multi-stakeholder collaboration, the World Economic Forum was reacting to rising concern expressed by financial services and healthcare companies, employers, governments and society.

However, no single stakeholder can hope to tackle the challenges or make the most of the abundant opportunities. Success will require diverse, multi-stakeholder collaboration and innovative approaches.

How much is enough?

With the timing of this report, we are presented with a once-in-a-generation opportunity for transformational change in retirement planning for many of us in Malaysia.

There is a need for hybrid solutions to address the increasing cost of medical and healthcare products and services.

After all, illness or sickness can happen to anyone at any time. We can experience possible medical bankruptcy at any age but the worst time to experience it is during old age. Such financial depression could end our life earlier than expected.

The million dollar question: How much is enough when medical costs could be escalating at double-digit inflation rates as we age?

It is almost impossible to calculate as the amount required is subject to unpredictable variables like types of illness, medical fees, medicine costs and more.

Concerted effort from everyone

The ability for Malaysians to ensure financial sufficiency for medical and healthcare during retirement is becoming severely reduced due to skyrocketing medical costs.

A concerted effort from different stakeholders is necessary. An effective collaboration between the Government, insurance companies, pharmaceutical firms, healthcare providers and the community to keep the financial support and aid within affordable limits is required. Initiatives from all stakeholders are also required:

·Individuals should start early with personal savings, contribution to Employees Provident Fund, life and medical insurances and investments for old age care;

·Employers should consider medical benefits for individuals under employment beyond retirement age;

·The Government should provide medical and old age care subsidies and assistance, and tax incentives to make private health and medical care affordable;

·Insurers should provide affordable medical and age care insurance that caters for specific needs and age;

·Price management is required on private health and medical advice, services, and products (food and medicines) to make them affordable; and

·Family and community assistance should focus on the provision of home care, nursing help, food, accommodation and emotional support with love, care and affection.

These ideas and strategies may not be comprehensive. Neither are they overnight solutions. They need adequate research studies and timely and appropriate decision-making processes from relevant parties.

The private sector can still benefit by catering to the needs of the elderly and the Government can facilitate old-age security while helping to overcome financial pressures on private healthcare systems and retirement plans for current and future generations.

In the bigger picture, it can be a collective and meaningful corporate social responsibility effort and initiative to turn a “greying society” into a “silver society”, in which the elderly live their golden age without financial worries associated with ageing and ill health.

·Yip is a personal financial coach and also founder and CEO of Abacus for Money.

http://biz.thestar.com.my/news/story.asp?file=/2010/3/27/business/5917769&sec=business

Comment:  No easy solution.  'Catastrophic illnesses' like a heart attack, cancer or stroke can easily impoverish the average family.  The costs for such illnesses in the private sector maybe equivalent to that of half the price of a small house.  Yet, for many, this may not be enough. The existing health care insurance schemes in Malaysia have contributed to, rather than curtailed, the escalation of health care costs.

How important is critical illness cover?

With one in every five critical illness claims for breast cancer now could be the time to make sure you have the right protection.

By Kara Gammell
Published: 3:56PM BST 01 Oct 2009

Most home buyers purchase life assurance when they arrange a mortgage, but only a minority obtain another form of financial protection that they are five times more likely to need before they reach retirement.

Critical illness assurance pays a tax-free lump sum on diagnosis of any one of a list of serious illnesses – including cancer and heart attacks. Claims statistics suggest you are five times more likely to suffer from one of these than you are to die before you reach 65.

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The good news is that medical advances mean more people than ever are surviving conditions that might have killed earlier generations. For example, more than 90pc of men diagnosed with testicular cancer are still alive five years later, while more than 80pc of women diagnosed with breast cancer have the same survival rate, according to the Office for National Statistics.

Critical illness cover can provide cash to allow people to pursue a less stressful lifestyle while they recover from illness, or use it for any other purpose. But half of women in Britain have no life assurance, critical illness cover or income protection and a quarter rely on their partner's policies instead, according to a survey by Axa.

But with one in every five claims for critical illness cover for breast cancer, and about 46,000 people diagnosed each year, now is the time to make sure you have the right protection.

Critical illness is relatively cheap and, on the face of it, relatively straightforward. You insure a fixed sum at the outset – usually the outstanding balance on your mortgage – this is paid out on the diagnosis of one of the 30 or so conditions listed on the policy.

But why do very few woman have this protection?

This cover has come in for repeated criticism in recent years as many consumers have complained that insurers rely on complex medical definitions to decide who does and does not get a payout. To be fair to insurers, most have clearly listed the exact nature of the conditions covered in the policy terms and conditions. But to the average healthy consumer, terms such as "in situ carcinoma" or "pre-malignant or non-invasive cancer" are nearly meaningless. Most simply assume that if they have bought a policy it will pay out if they have cancer.

If you bought the policy from an independent financial adviser, they should explain that they only cover certain conditions, and that these conditions have to be of a specified severity to qualify for a payout.

Kevin Carr, spokesman from PruProtect, said: "Breast cancer is covered by critical illness policies, but many policies exclude 'early stage cancer' which is when cancer is considered to be non-invasive. Breast cancer may be considered 'early stage' even if a lumpectomy or mastectomy is required and therefore many insurers will not pay out. The other main exclusions are for certain types of prostate and skin cancer."

However, he said that there are a few insurers such as PruProtect, Axa, Royal Liver and Skandia who look at cases on a severity basis and will pay anything from 10pc to 100pc of the sum assured, depending on the condition.

Prudential takes a slightly different approach with its "serious illness" policy. It will make reduced payments to those with less severe types of breast cancer and other conditions typically not covered on a standard critical illness policy. Those buying a critical illness policy have the option of renewable or guaranteed premiums.

The latter are more expensive, but you know payments will remain level throughout the life of the policy – which may run for 20 years. Renewable premiums may be lower, but prices could rise if, for example, new screening methods result in more claims.

Mr Carr said: "Critics of this system say that it is too confusing for customers, but we disagree. When you break your wing mirror on your car, your car insurer does not pay out the total value of your vehicle. Our system is basic common sense."

Many insurers will have a detailed guide to the illnesses and conditions covered, which will be written clearly. Ask to see this, as well as the document setting out the policy's key features, benefits and exclusions.

Most people buy critical illness cover when they take on a major financial commitment, but it's important not to buy the first policy offered – shop around.

It also pays to start young when premiums will be relatively cheap, rather than leaving it until later in life when the price of cover will start to rise substantially.

Matt Morris, policy adviser at independent financial advisers LifeSearch, said: "Once you take out a critical illness policy, it is not usually worth making any changes to it and you have to be very careful when switching critical illness policies. But if you do, it is crucial you never cancel an existing policy until a new one is in place."

Survivors of cancer who want to take out this type of cover need not pay more than they have to, as Bupa, Fortis, LV= and Zurich will cut a client's premium if they exclude cancer from a policy.

There are more than 200 types of cancer, according to charity Cancer Research UK, and one in three people will develop some form of cancer during their lifetime.

Michael Whyte, chief underwriter for Aviva, said: "Critical illness and life policies are the type of policy nobody wishes to
need to claim against, yet evidence shows that these are vitally important policies that can support families and secure their financial wellbeing during the worst of times."

October is Breast Cancer Awareness Month. To make a donation to Cancer Research UK, call 08701 602040 or send a cheque to: Cancer Research UK, PO Box 1527, Oxford, OX4 9FG

http://www.telegraph.co.uk/finance/personalfinance/insurance/criticalillness/6251215/How-important-is-critical-illness-cover.html

Get critical illness cover for peace of mind

Illnesses that used to be fatal are now survivable, so it makes sense to protect yourself from the fallout.

By Emma Wall
Published: 12:14PM GMT 23 Feb 2010

Phil Smith received £1.2m payout from his critical illness insurance after being diagnosed with skin cancer. He now has the all-clear and his family has financial security. Photo: Christopher Jones

Nearly two-thirds of the population have no form of financial protection if they die or become critically ill, despite advances in medicine and technology that mean more people are living longer and surviving illnesses that used to be fatal. In research conducted by insurer Aviva, most people aged 45 to 54, the age group most likely to claim, say they cannot afford protection.

But a debilitating illness can take years to recover from – and while your company may readily allow you sick leave, it can be restricted to a pay percentage or term length. Without a source of income, family savings can quickly dwindle on the essentials – let alone expensive medical care, or unexpected costs.

Although most homebuyers take out life cover to ensure loved ones are provided for in the event of their death, few people realise the financial implications of surviving – but in serious ill health.

"The diagnosis of a life-threatening illness can mean you will have to give up work temporarily or permanently and you may decide to pay for complementary treatments that are not available through the NHS to aid your recovery," warned Stephen Crosbie, of Aegon. "You're also still likely to incur costs such as mortgage repayments, loan repayments, utility bills and other living expenses."

Critical illness cover typically provides an individual with a lump-sum payment or monthly income if they survive for at least 14 days after being diagnosed with an illness that meets the policy's criteria. These can include cancer, Alzheimer's, multiple sclerosis, organ transplants, a stroke or heart attack among others. Cover cannot be purchased for a pre-existing illness and the younger and healthier you are, the lower your monthly premium – so it pays to be prepared. Premiums can be guaranteed or reviewable, meaning monthly payments are fixed for the term of the policy or can change on an annual basis. Customers can choose which type is best for them depending on their needs, as reviewable rates are initially cheaper, but the rates are reviewed every five years at which point they could increase. Guaranteed rates ensure customers pay the same premiums throughout the life of the policy.

As technology allows us to live longer, illness blights lives. Assuming you will be one of the lucky few is not practical – nearly two thirds of the population has not bought any form of protection, such as life insurance or critical illness cover, but one in three of us will be diagnosed with cancer, and every year about 146,000 people in Britain have a heart attack. Each year, 10,000 people under the age of 55 suffer a stroke.

Axa says that the average age at which people claim for critical illness cover is 43 for a man and 40 for a woman – a time when expenses are high, with children still at home and a mortgage outstanding. This means that without cover they may struggle.

You can buy critical illness cover in conjunction with life cover, and some company health policies include it as standard, so it is advisable to check what cover you have before taking out a new policy. Some life insurance policies may pay out if you are diagnosed with a terminal illness – but not if it is in the final year of the benefit term. If you are self-employed or run your own business, critical illness cover will not just protect your family should you become ill, but your business, too. Company policies may pay for your bills and mortgage, but they often won't stretch to other expenses such as child care or travel. Aviva offers ''integrated'' critical illness cover that includes life cover to a selected sum – usually the amount outstanding on the policy holder's mortgage.

When buying a critical illness cover, consider whether the policy matches your needs. For example, some insurers will automatically include children's critical illness cover to your plan – while others will have an option to include a spouse. You may want overseas cover should you spend time abroad, or are planning to retire overseas.

All of these inclusions will affect your premiums. Because of the individual requirements of a policy, these quotes from Axa are generalised, but

• a monthly premium for a healthy, non-smoking, 40-year-old male requiring £150,000 of critical illness cover over a 20-year term is £77. 
• The monthly premium for a healthy, non-smoking, 40-year-old female requiring £150,000 over a 20-year term is £73. 
• In comparison with life insurance, a monthly premium for a healthy, non-smoking, 40-year-old female requiring £150,000 of life cover over a 20-year term is £12. 
• The monthly premium for a healthy, non-smoking, 40-year-old male requiring £150,000 of life cover over a 20-year term is £15.

Life cover may be affordable, but you are much more likely to become seriously ill than die before you reach retirement age.

To illustrate how the later you leave it, the more expensive cover is, just five years on, 

• Axa's quote for a non-smoking male aged 45 years, based on a smaller benefit of £100,000 over a 20-year term, is £85 a month. 
• Fortis quotes the same individual £75 a month, and 
• PruProtect £96.

Statistics show that the number of critical illness claims paid out is increasing. In the past, insurers would have required a letter from the claimant's doctor detailing their full medical history. Due to new guidelines from the Association of British Insurers, now assurers require only medical details relating to the critical illness claim – so you are less likely to have your claim about cancer dismissed because of your non-disclosure about an ingrown toenail.

Additional information may be required if the insurer suspects the claim is fraudulent or the claimant is guilty of non-disclosure. 

• Non-disclosure can lead to a claim being dismissed, but only if the insurer can prove it was deliberate. 
• Alternatively, innocent or negligent non-disclosure relating to a misleading question or misinterpretation of the application form can still result in a payout.

It is not worth risking voiding your policy over misinterpretation, however, so it is always advisable to contact the insurer with any questions.

Do you require Life Insurance?

Telegraph Life Insurance, provided by Click, enables you to compare prices from major life insurances in one simple call. To find more, please call 0800 180 4158 or visit life-insurance.telegraph.co.uk.

http://www.telegraph.co.uk/finance/personalfinance/insurance/criticalillness/7298359/Get-critical-illness-cover-for-peace-of-mind.html

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