We often talk to clients about the need to cover themselves and their families against the possibility of being diagnosed with a serious illness and the potential financial burden that may bring. We wrote about protecting your income in a previous article but that really isn’t what Specified Illness Cover is about.
So let’s be clear – a Specified Illness Cover will cover a lump sum amount if you are diagnosed with an illness from a pre-defined list of conditions within a specific term. An income protection policy will cover a portion of your income after a set period of time, usually 3 or 6 months if you are unable to work due to illness and injury. While they may seem quite similar to people it’s important to define their purpose a little more clearly. For me it’s not an either/or scenario and you should have both. However there tends to be more of a focus on income protection.
There are some bills that don’t care if you are sick – your mortgage, the electric bill, Netflix, the children’s summer camps. This is why we set aside savings and include income protection as part of your financial plan. Where Specified Illness Cover comes into its own is the often forgotten financial stress that could be attached to being diagnosed with MS, cancer, or suffering a heart attack or stroke.
I am sure the diagnosis of a serious medical issue can be devastating and mind numbing. Then the questions start. What are my likely outcomes? What about the treatment plan – where will that happen and how long will it take? I’ll tell you a personal story to illustrate my point. Many years ago while still only a teenager my father was diagnosed with cancer of the larynx. I still remember to this day where I was and how I felt when he told me. Today, more than 25 years later, that still rests with me and I wasn’t the person going through the disease. My father’s treatment plan included many weeks in Dublin for treatment, away from his family and support network. He was very kindly put up during the week by family connections and he would travel home to Galway each weekend, worn out. I can only imagine how difficult that was for him and what having his own space and not having to travel up and down
to Galway would have done for his recovery. A Specified Illness Plan would have paid out for him, and he could have used the funds to pay for a hotel or anything else that would have made treatment a little easier.
With Specified Illness Cover in place, upon diagnosis and acceptance of your claim you will receive a tax free cash lump sum which you can use however you wish. You could use it to address your most immediate financial responsibilities, such as paying off a mortgage to secure your family home for you and your loved ones, or discharging any outstanding debts such as personal loans, car loans or credit card balances. Measures like these can take a financial weight off your mind and give you the time and energy you need to focus on the treatment of your illness. You could also choose to use the lump sum to cover your ongoing living costs such as mortgage, rent and other typical lifestyle outgoings. Much depends on the nature and progression of your illness, but the point is that the choice is entirely yours.
The general rule of thumb is to cover 1 -2 years net household income but like everything it is very dependent on individual circumstances including level of unsecured debt and number of financial dependants. So what does this all cost I hear you ask? Well cover for a 40 year old woman covering a
lump sum of €50,000 for the next 20 years can be as little as €28.62 per month from Royal London.
*Prices accurate as of the 14/07/2021. Source: MoneyAdvice
When it comes to who claims on the policy 68% of claims in 2020 in New Ireland were for people between the ages of 40 and 59. Across all insurers it is a fairly even split between men and women claiming. Cancer accounts for nearly two thirds of all claims across both men and women followed by cardiac issues and multiple sclerosis.
At Maven Financial Planning we can help you choose the right Specified Illness Cover for your needs and circumstances, and strike the right balance between Life, Income and Specified Illness cover. Contact us today on 091-769566 to review your protection cover.
