Income protection insurance policies by Aviva will now offer more focused cover for highly skilled workers, providing a clearer and narrower definition of events which qualify for a payout.

Highly skilled medical and other professionals may now choose to buy income protection cover for losing the ability to do their “own occupation”, rather than being covered only for the eventuality of losing their ability to do a “suited occupation”.

“Suited occupation” cover in income protection insurance meant that a surgeon who injures a finger or hand, affecting or ending their ability to operate, would not receive a payout, as they would still be able to work in a related (‘suited’) occupation, such as a surgical consultant.

Now, Aviva can provide the surgeon with ‘own occupation’ cover, so that the income protection policy would pay out for the loss of the ability to perform operations.

“Own occupation” cover is up to 70% more expensive than the broader “suited occupation” cover, as losing the ability to perform all suited occupations would require much more extensive injuries or illness, and thus be less likely, than simply losing the ability to perform operations.

The principle behind the move has implications for holders of income protection insurance and also critical illness insurance in many professions, as it gives greater freedom to ensure a payout if you are forced to give up the profession you have trained for.

This provides considerably more reliable income payment protection insurance cover (IPPI) for all professions. In the past, for example, a professional lorry driver, injured in a road accident and confined to a wheelchair, could have been denied a payout, as the insurer could maintain they were still fit to work in other professions, such as office administration.

Aviva health insurance policies would normally offer full cover for the cost of specialist consultations, diagnostic tests, and specialist referred treatment by a physiotherapist, chiropractor or osteopath.

However, with the new ‘Healthier Options’ modular policy structure, customers can now obtain a 30% cheaper health insurance premium if they limit their health cover for consultations to £500 per year, or a 15% premium if they limit their annual cover to £1,000.

Customers can now also cut their premium costs by accepting a higher excess level on their health insurance policy. The excess charge is the initial cost that will be carried by the policyholder, before their health insurance policy takes over.

Aviva customers who agree to pay the first £5,000 of their own costs, before their health insurance policy takes over, can benefit from a discount on premiums of up to 65%. Those who agree to pay the first £3,000 of their own costs will be eligible for a discount of up to 50%.

Further optional excess levels range from zero (i.e. the health insurance kicks in straight away) to £100, £200, £500 and £1,000, and bring premium discounts of between 5%-35%.

Healthier Solutions also offers a ‘protected no-claim discount’ option, where customers pay extra to ensure that if they do claim on their health insurance policy, they may not lose their no-claims discount.

With the lack of investing advice, many people have poor-performing ISA’s or bonds, and have not adequate pension provisions in place. A good financial planning firm should be able to explain all aspects of investments, giving you investment advice that suits your risk profile, and giving your investments the best chance for growth.

There are many different investments in the market, and some 3076 investment funds now available. A good financial planning firm should be able to show you where your existing investments stand in relation to their peers. We recommend seeking financial advice on your investments, and if possible use a firm of Chartered Financial Advisers, as this is the highest quality standard given to a financial or investment advisor firm.

Principle First are now offering online investment advice. For clients that want to receive an analysis of their investments over the telephone and post, this is now an option, we currently give many clients the option of remote financial advice.

If you would like to review your existing options, enquire online, or call us on 0800 678 5929

Click Here for Investment Advice

Consumers with a critical condition which comes in mild and more severe manifestations can often find themselves at odds with their critical illness insurance provider, over the validity of a claim.

A more flexibile option is ‘severity-related’ critical illness insurance, which offers a partial payout for less severe episodes of critical conditions.

One example is the PruProtect critical illness policy by Prudential.

By linking payouts to the degree of severity of the illness, the PruProtect critical illness policy makes possible an immediate payment for a less severe incidence of a condition, while still leaving cover in place for possible future repeat events.

“A good example is blindness,” said Deepak Jobanputra, actuarial director at Prudential.

“While a customer would have to be totally blind in both eyes for a conventional critical illness policy to pay out, we offer a payout for partial blindness or tunnel vision – which can still have a significant impact on your ability to work, and your lifestyle.”

The amount of a first payout is deducted from the total amount of cover, so that an initial payment of £40,000 on a £100,000 policy would leave a possible £60,000 to cover future eventualities.

This contrasts with conventional critical illness policies, where severity must meet strictly-defined and measurable criteria before the policy will pay. In the case of heart attack, for example, significant changes must register in electrocardiogram (ECG) readings to verify heart damage, in order to justify a full payout.

The logic of severity-based critical illness cover is to improve and widen the parameters of ‘certainty of claim’. This means that clients are better off if they are eligible for a 25% payout for lesser manifestations, when previously there would have been no payout at all.

Although Prudential is the only purveyor of a severity-based critical illness policy at present, the concept of a partial payment for less serious incidences is certainly an idea whose time has come.

In 2009, BUPA Individual Protection launched a product which, although not a severity-based insurance product, also uses the concept of partial payout for the specific conditions of low-grade prostate cancer and mastectomy.

Mastectomy is also included on a partial payout basis in critical illness insurance by Royal Liver.

Most of us have a life insurance policy, to ensure that our family is provided for at the end of our life, but far fewer of us have critical illness insurance.

However, if you are struck down by ill-health, your family may be deprived of your income, because you cannot work.

The figures may show that the likelihood of a critical illness is greater than you think.

The insurance companies tell us that 25% of all men, and 20% of women will be forced to give up work due to serious illness, before they retire. These are not only the elderly, approaching retirement age. Critical illness is just as likely to befall those who are relatively young.

In fact, the most common age for this to happen is 45, according to the insurance company Legal & General, and of those who claim for critical illness on Legal & General health insurance policies, 71% are under 50 years of age*.

Furthermore, over half of health insurance claims are due to cancer, and one in three of us will get some form of cancer during our lifetime**.

If you are unfortunate enough for this to happen, you may find that your partner must give up work as well, to stay at home and care for you. This can mean the loss of both family incomes and bring severe hardship, particularly if you have a mortgage, debts, and children in full-time education.

The consequences can be harsh. With the cost of university education now running to many thousands of pounds a year, a critical illness could block your children from completing their education, or force you to decide which one of your children gets to go.

Critical illness insurance

All of the above facts amount to one unavoidable conclusion: insuring yourself against long-term illness is just as important as insuring your life.

Critical illness cover provides protection against such an unexpected and abrupt ending to your working career.

It provides a single lump sum payout when you are diagnosed with one of a list of serious illnesses or medical conditions. This payout can be a lifeline that will pay off your mortgage, or provide a financial cushion for your family, to help see you through the personal crisis of losing your health. Many criticial illness policies also cover the health of your children, at no additional cost.

Which illnesses are critical?

While each of the various policies from the main insurers has its own list of illnesses that are covered, most cover the core conditions, including cancer, heart attack, stroke, kidney failure, major transplant, heart bypass surgery, and multiple sclerosis.

Reading the ‘small print’

For critical illness insurance, as with any form of insurance, every policy is different, and ‘the devil is in the detail’. In other words, it is essential to understand the small print. It is particularly crucial to understand the exclusions of any health policy, in other words, to understand what is not covered by the policy, as well as what is.

Making the application

The process of signing up for a critical illness insurance policy is equally important. Insurers often do not look at your full medical records when a policy is taken out. They rely on you to share all the information you are asked for, and even accidental failure to provide full details can render your policy null and void, if you later need to claim.

Get the right financial advice

This is why insurance should only be bought with the assistance of a qualified financial adviser, who has plenty of experience in dealing with applications, and knows the application process of your chosen insurance company.

Best of all is an independent financial adviser, who is not tied to one bank or insurer, and can look at all the various policies on the market. In other words, an adviser who can take what is known as a ‘whole of market’ approach.

Only an independent financial adviser can take into account your personal situation, and locate the critical illness policy that is exactly right for you. 

* Figures relate to Legal & General insurance claims in 2007.

**Source: Cancer Research UK

The pitfalls of arranging your own life insurance cover, health insurance, home insurance and motor insurance online or via price comparison websites have been highlighted in new guidelines by the Association of British Insurers (ABI).

Insurers, eager to provide a rapid-response “quick quote”, sometimes fail to ensure that the customer understands the terms of the insurance cover being offered. Customers buying life insurance and other insurances online, rather than with the help of a financial adviser, must currently beware of inadequate information in four key areas:

• Insurance policy information: the key features of the life insurance or health policy may not be clear online
• Which aspects of the insurance policy are “add-ons”: not all features of an insurance policy may come as standard, some may need to be specially requested, at extra cost
• Excess levels (motor cover): voluntary or compulsory excess levels may not be made clear online
• Referrals: where a customer cannot be covered, he should, but may not, be given a clear referral to an alternative provider

Furthermore, online applicants are often not informed of assumptions that the lender makes about them, when compiling their quote, and may be unaware of the exclusions contained in the “small print” of a life insurance policy, a health insurance policy, or home and motor cover.

By buying life insurance through a financial adviser, however, consumers will have the conditions and exclusions of their policy explained to them, so that they are fully aware of what is covered. An adviser will also guide them through the sometimes complex application process, which can be a minefield for the uninitiated. Neglecting to provide a specific, perhaps minor detail of your past health history can be enough to invalidate a future claim.

Furthermore, an independent adviser can take a ‘whole of market’ approach to ensure that he locates the life insurance policy that is right for you.

Aviva is planning premium discounts on its critical illness insurance for those who have come through cancer, and would therefore not have cancer cover in their policy.

“Aviva are planning to introducing price reductions for cancer exclusions as it is clearly the right thing to do for the customer. We will be making an announcement in the near future,” said Michael Whyte, chief underwriter at Aviva.

The reduced premiums acknowledge the fact that cancer, the most common claim under critical illness insurance, is excluded from the cover offered to customers with either a personal or family history of the disease.

Cancer accounted for 64% of all critical illness claims made to Aviva during the first half of 2009. In the same period, 9% of claims were declined as the condition claimed for was not covered by the claimant’s policy.

Legal & General, Zurich, LV= and Axa have already introduced favourable premiums on their critical illness insurances, to recognise exclusions under their cover. L&G claims to offer reductions of up to 18% for those with a personal or family history of cancer.

What is critical illness insurance?

Critical illness insurance provides a single payout if you are rendered unable to work due to a defined list of diseases and conditions. In addition to cancer, the main illnesses normally covered would include heart attack, stroke, kidney failure, major transplant surgery, heart bypass surgery, and multiple sclerosis.

With critical illness insurance, as with all insurances, the small print is critical and is best explained by a qualified financial adviser.

First, the common conditions of back pain and stress are usually not covered. Second, stroke and many other ailments are not covered in many critical illness policies. Heart attacks in particular must be of a certain level of severity, and leave permanent symptoms. No claim will be entertained if it results from alcohol or drug abuse, criminal acts, or injuries deemed to be self-inflicted.

Another factor to consider is that, due to advances in medicine, certain medical procedures that would previously have been regarded as critical are now excluded from some critical illness policies.

The new legislation, to be tabled in Parliament by the Law Commission on 15^th December 2009, will transform the way that insurance companies treat claimants who make innocent mistakes when applying for insurance cover.

Up until now, a law dating back to 1906 places a ‘duty of disclosure’ on the applicant which requires them to inform the insurer of all issues relevant to their health, whether explicitly asked for on the application form or not.

This holds the applicant responsible for judging what information is relevant, and also for informing themselves of all details they may be unaware of (e.g. their parents’ health history).

The new proposals will shift the onus on to the insurer to ask all relevant questions, so that the current culture of ‘failed to answer’ will become a culture of ‘failed to ask’, when it comes to all critical illness claims, health insurance claims and so on.

The insurance industry has already made voluntary advances in this area, with insurers such as Aviva cutting dramatically the number of health claims they question on the grounds of accidental or inadvertent non-disclosure.

Insurers point out that incomplete information on an insurance application form can result in a customer receiving insurance cover more cheaply than they should.

Such claimants can in future be deemed ‘careless’ rather than ‘reckless’ under the law, and will still qualify for all or part of the cover from their health or critical illness policy.

The changes to the duty of non-disclosure will also relate to accidental ommissions in applications for home insurance, travel insurance, and motor insurance as well.

An ‘Immediate needs annuity’ is designed to provide the costs of paid-for nursing home care for life, for those already suffering from physical or mental disability, and who are no longer wishing or able to live at home. 

The annuities are bought with a lump sum, but can now offer a guaranteed partial payback if the person in care dies within a short time of buying the annuity. 

The facility is designed to alleviate the fears of customers or relatives who hesitate to invest so large a sum, when the person to be cared for may live for only a short time, after the purchase of the annuity. 

AXA offers 3-month or 6-month insurance guaranteeing 25%, 50% or 75% payback on the annuity, according to Brian Fisher, LTC marketing manager. 

The shorter-term options of just 3 or 6 months are the key to making the cover affordable to the customer, Fisher said. 

“Our 6-month, 75% cover can typically add just 5% to the cost of the annuity,” Fisher said. 

“That compares with the cost of long-term, 75% payback protection, which can add as much as 40% to the cost of the annuity, because you are insuring the lives of very old, very sick people.” 

One restriction on the guarantees is that the benefit cannot go outside the estate of the annuitant, for Inheritance Tax purposes, he said. 

Partnership is another provider which introduced the guarantees on its annuity products earlier this year, and offers a payback if death occurs within the first six months of the policy. 

With Partnership’s guarantee, the purchase price of the annuity will be repaid in full if death occurs within 1 month after buying the policy, 50% will be repaid if death occurs in months 2 and 3, and 25% will be repaid if death occurs in months 4, 5 and 6. The costs of payments already made to the nursing home will be deducted.

The list of concerns the ABI has raised serves to highlight for consumers the pitfalls in the small print of health cover.

The primary concern for the ABI is to work towards an industry-wide consensus on the definition of Total and Permanent Disability (TPD). 

It is also important for consumers to understand that TPD is often treated as an add-on part of a health insurance policy, and that those policies that do include it in their cover can contain exclusions that apply solely to the TPD element.

In the case of certain Legal & General health policies, for example, one definition of TPD is a situation where the assured ‘is totally unable to follow his/her own occupation and in the opinion of Legal & General’s Chief Medical Officer is likely to remain so permanently. 

Another definition of TPD used for other L&G policies is that the assured be unable to perform at least three of the following activities: walking 200m unaided; getting into or out of a car or bending to pick up an object from the floor; communicating by answering a phone and take a message; reading a daily newspaper with glasses if needed; writing legibly without aid; and climbing a flight of stairs without stopping or suffering severe discomfort. 

Some of the specific terms to be addressed include the following, in relation to health and critical illness insurance: 

Cardiomyopathy: this technical medical term must be explained to consumers as inflammation of the heart muscle, and the symptoms of breathlessness and chest pain should be mentioned. 

Rheumatoid arthritis: it should be made clear that rheumatoid is a specific type, as there are various other types of the disease which may not be covered. 

Severe inflammatory bowel disease: consumers must not be allowed to confuse this with the less serious condition of irritable bowel syndrome. 

Severe specified mental conditions: it must be clear to consumers that policies can require a stay of at least 8 days in an NHS mental hospital, in order to qualify for cover.