Improving terminal illness cover
PlanTech's Louie Dimovski offers some advice on how terminal illness cover could be improved.
Thursday, February 14th 2002, 2:35AM
by Louie Dimovski
Advanced payments of the life cover for terminal illness has become a staple feature of any term life policy in today’s market. Benefit payments for terminal illness help the insured to get his or her financial affairs in order while they are still alive, providing them with peace of mind that allows them to concentrate on battling their condition.
Many people base their life cover requirements on the financial consequences that his or her pre-mature death will have on the people that they most care about.
When determining appropriate cover levels, the adviser will typically take into consideration outstanding debts and obligations, lifestyle requirements of dependants, future education costs for children and funeral and estate fees.
But how often does the adviser take into consideration the financial cost of their clients suffering a terminal illness?
If life cover is the only form of protection in existence, your clients may find that the lump sum they receive from their policy is eroded away by having to pay for high medical bills and other costs associated with having to live with a terminal illness.
This may result in a shortfall of funds to put all affairs into place, leaving loved ones in some financial difficulty.
A quick and simple way to counter this situation, is for the adviser to include this extra requirement as part of their client’s life cover needs, however, this solution may not be entirely cost effective, especially if your client is over the age of 45.
Alternatively, life companies could take a market-leading stance by providing a benefit that would cover terminal illness expenses, on top of the basic life cover requirements.
It is surprising to see, in a highly competitive risk market, that New Zealand life companies have shown limited marketing savvy to develop term life benefits that can truly benefit the consumer.
One major life company should be applauded for going to some extent to provide a cost-effective benefit that will help alleviate the financial burden of suffering a terminal illness. Under this option, the company allows the consumer to insure against these extra costs, at a premium that is considerably lower than their standard life rates, in addition to providing basic life cover, resulting in a higher lump sum becoming payable upon the diagnosis of a terminal illness.
However, this author would like to see a similar feature included at no extra cost to the consumer. Life companies should seriously consider including a built-in benefit that, at least, provides a small lump sum in addition to the underlying life cover upon diagnosis of terminal illness, as a gesture of good faith to consumers. The first company to do so should be able to more readily differentiate their term life product from the rest of the market and, hopefully, gain a noticeable increase in market share.
In order to ensure its profitability, the New Zealand risk market must be active in developing innovative and value-adding benefits and features that will entice more consumers to purchase life cover.
Introducing a bonus terminal illness benefit at no extra cost is one way of doing this, resulting in an increase in new business and greater retention of policies in force. As the adage goes, sometimes you have to give a little in order to get back a lot.
Louie Dimovski is a researcher at PlanTech Consulting Group (www.plantech.com.au). PlanTech is a developer of comprehensive insurance comparator – Risk Researcher.
Louie Dimovski is a researcher at PlanTech Consulting Group (www.plantech.com.au). PlanTech is a developer of comprehensive insurance comparator – Risk Researcher.
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