A lot of experienced and qualified  financial advisors would be of the same opinion that Financial Protection Insurance is necessary to the majority of families, either as a  safeguard in the event of premature death, prolonged illness, loss of employment (especially in the present economic climate), or cover for an accident.

Life Insurance is the foundation of all financial assurance for cover for a mortgage or to ensure a lump sum that is not taxable, in the eventuality of death. Sadly, a proportion of other Financial Protection Insurance types, do not do not have similar reliable qualities and have been branded as being miss-sold.  Also, based on what we know, critical illness cover has suffered owing to startling omissions from insurance policies making it feasible for insurers to reject many claims, as genuine as they may be.

In spite of this, some faith was reinstated when Aviva gave details on the conclusion of claims on Critical Illness Insurance policies on their half yearly statistics.

Critical Illness Insurance claims were being rejected because clients did not disclose their full medical background.  As a result Norwich Union  says that in the last five months the amount of declined claims has reduced considerably from 6.8 per cent in the last year, to 1.5%.

Why? We think, not only Legal and General but all of the life insurance companies, because of destructive public relations, have been placed in a position whereby they must diminish the number of claims that are rejected. Does this show how forceful the media can be?  Debateable perhaps – you may think we are cynical but we believe there are other issues that encouraged the insurers to make modifications. Lately, as a result of dire media, sales of Critical Illness Insurance policies  have declined which in turn has clearly impinged on the insurance company’s profit. This was probably the catalyst that promoted the change!

Scottish Provident, Friends Provident, Axa and Norwich Union have instigated some important changes purposely designed to decrease their rejection rates. To start with, they silhouette clearly that all health disclosure, however insignificant a visit to a Doctor might have been, must be includedmade known. Scottish Provident, among others will get a Doctor or Nurse to telephone every candidate to discuss all the details of their medical record. If the policy then goes on risk, some policyholders are being informed that it is essential that they provide complete health disclosure and they are allowed to add or put right any details on their application.

The insurer may then re-evaluate the risk and if it is believed to be increased the monthly payments will likely be increased – which seems more reasonable and eventually more appropriate than paying the original premium then having a claim rejected due to non-disclosure of medical records.

This action should have been put into operation by the Insurance Companies years ago as the public’s understanding of Protection Insurance has eroded by their somewhat strange approach. Without doubt, there is a clear and necessary need for protection insurance so we can hope that it is able to re-build trust and then the popularity it rightfully merits. 

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Ian Marsh, a Director of investments at Lancaster-based financial adviser Peel Townsend Financial Services, counsels that it is very narrow minded of people not to have Life Assurance and/or Critical Illness Insurance as he maintains that life has two main dangers – either living too long and dying too early.  “Its absolutely vital to have some insurance in place – especially if youve got small childern,” he says. “In these unsettled times you must build your own little stronghold because no one else is going to do it for you.”

Paul Harris at Moneynet says now is the right time to purchase such plans as there are lots of very competitive premiums around owing to the intense competition for business within the market. “The cost of life insurance has come down – gone down by about 40% in 5 years. It has never been cheaper,” he states. “The critical illness insurance market paid out on 84% of claims in 2004 – up from 79 per cent  the during the last year.”

Check what cheap life cover you already have before you take out any more.  Do you have any investment policies or does your company pension fund give you any other cover?

The easiest way to estimate how much insurance you require is to work out how much you would need to retain the same level of living over a year and then multiply it by twenty six years.  The minimum amount required should pay off any outstanding debt and and leave a lump sum for your family.

Making sure you get the best deal

When deciding on your insurance policy it is very important to read the guide that most a lot of insurers have of the illnesses and conditions that they cover. It will record everything and should be clear-cut and simple to understand.  You will also need to review the documentation of the main points of the cover which will include all benefits and exclusions.

When people take on the responsibility of a mortgage they are normally counselled to take out critical illness protection but should shop around and not just take the first policy suggested.

If you begin paying these insurances when you are young they are noticeably cheaper, distinctly different to leaving it until you are older, when insurances rises quite considerably.

Insurance premiums can also be reduced by giving up smoking.  Fiona Jackson, head of protection at Thisismoney states “Giving up smoking can save people a significant amount of money as well as hopefully bringing a longer and better quality of life.”

If you quit smoking you can knock as much as a 1 3rd off life, critical illness  insurance and income protection insurance payments because the data that we now have indicates that smoking can bring about severe illness and exacerbates any other existing medical conditions.

You may have to change your policy if your circumstances alter.

By no means feel that once you have bought your policy that you can just continue with your life and disregard it. Always be very aware of the life assurance you have and make certain that, should your circumstances alter, or, is going to change your insurance policy must accommodate these ajustments.  Obvious examples are changing jobs, or perhaps you intend to increase your family; regularly consider everything that may raise your living costs and must be to be covered if you are too ill to work.

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