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Critical Illness Insurance - Latest Claim Statistics

I attended a seminar this week on the subject of 'behavioural finance' at The Baltic in Newcastle. Whilst the subject that the very accomplished American speaker covered was very relevant for all investors, it was a personal story that he shared which I remembered the most afterwards. He told the audience how the death of his father when he (the speaker) was a child had more than just the expected emotional impact that one would expect. Something else lingered on in the speaker's mind for MANY years and it took him a long time to get over the issue and accept it. What was it, you may be wondering? His father did not have sufficient life insurance when he passed away. The impact on the family was devastating. Until his father's untimely death his mother had remained at home to look after him, his brother and two elder sisters. Now, without the financial support that his father had provided, his mother had to find a job. The negative impact of that of course was that she was now unable to spend as much time at home with her children. Worse still, once his two sisters were old enough they were sent out to work in order to generate sufficient income so that THEIR TWO BROTHERS COULD GO TO COLLEGE. Apparently, that's the way these sorts of situations were dealt with in those days in New York. For years the speaker was angry with his father - he directly held him to account for the fact that his two sisters were denied a college education. If only his father had taken the necessary steps to get his financial affairs in order... Having the right amount of financial protection, be it life insurance, income protection or critical illness cover should form the foundation of everyone's financial strategy. Ok, maybe if you have sufficient assets in place you may not need to buy any cover, but for the vast majority having some form of cover will be essential, not to mention the most sensible choice when faced with the alternatives. Regular readers will know that not only do you need to be aware of the small print within insurance contracts, you should also keep an eye on the claims statistics of each insurer. After all, there's not much point in having the cheapest critical illness policy if the insurance company concerned has a reputation of avoiding claims where it can. With regards critical illness, hundreds of thousands of people fall critically ill every year, often having a devastating impact upon those around them. Cancer There are around 293,600 new cases of cancer diagnosed each year in the UK and there are more than 200 types of cancer, with breast, lung, bowel and prostate cancers accounting for over half of all new cases. Heart More than 30,000 people have heart surgery in the United Kingdom each year. There are 3,436 aortic valve replacement operations with a national survival rate of 98%. In 2007, there were 19,957 heart bypass operations with a national survival rate of 98.3%. The national survival rate for all types of heart operations is 96.6%.

Source: Care Quality Commission 2007 Let's take a look at the claims experiences of two companies, Aviva and Legal & General, for critical illness cover. Aviva (January - June 2010) Claims at a glance: - Paid out 93% of all Critical Illness claims - Paid out on 684 claims which amounts to over 51 million - Paid an average of 74,740 per claim - Average age of male claimants - 45 years 2 months - Average age of female claimants - 42 years 8 months - Most claims are in the 40-49 age range - Average length of policy before claim - 6 years, 2 months - Total number claims declined - 51 - Percentage of claims declined as the illness did not meet the critical illness definition - 6% - Percentage of claims declined due to discovery of material non-disclosure at the time plan was taken out - 1% The majority of claims were for (both sexes): - Cancer, 65% - Heart attack, 10% - Stroke, 8% Interestingly, the figures for each sex are: Male - Cancer, 50% - Heart Attack, 19% - Heart Surgery, 9% Female - Cancer, 77% - Multiple Sclerosis, 9% - Stroke, 8% Some specific claims were: - Female, cancer - lymphoma, age 28 at claim, 249,996 paid - Male, kidney cancer, age 40 at claim, 138,406 paid - Female, heart valve replacement/repair, age 49 at claim, 40,116 paid Aviva, like most insurers, also include children's critical illness cover on their policies. This is not usually the reason why cover is purchased, however it's useful to know that this benefit is included. Caring for a critically ill child may mean that carers have to take time out from work and, in such times, the proceeds from a claim can help to alleviate the financial stresses. The maximum payout is 20,000 with Aviva.

In between January and June 2010, they paid out on 47 children's critical illness claims: - Cancer, 72% - Stroke, 9% - Traumatic brain injury, 9% Source: Aviva Critical Illness Claim Report Legal & General (2009) Claims at a glance: - Paid 93.6% in critical illness claims - Paid out on 2,149 claims which amounts to over 152 million - Largest claims payout 750,000 - Paid an average of 70,731 per claim - Average age of claimants 44 years - Only 6.4% of claims rejected - Number rejected for non-disclosure - 41 (1.8%) - Claims not meeting definition - 107 (4.6%) The majority of claims were for (both sexes): - Cancer, 49% - Terminal illness, 23% - Heart attack, 8% - Stroke, 5% - Multiple sclerosis, 4% Plus: - 53% of male claimants were aged 50 or under - 80% of female claimants were aged 50 or under - 58 children's claims were paid Source: Legal & General Critical Illness Claims Data 29.7.10 The Financial Tips Bottom Line Even though we've mainly looked at critical illness, I believe it's important (as well as being responsible) to ensure you have the right amount of protection in place if you or those around you may suffer financially in the event of you either not being here or suffering from a serious illness. Only YOU will know if your bases are covered or not, so I urge you not to take any chances. ACTION POINT Take action NOW and review your current position. I'd suggest these steps: 1. How much cover do you need? 2. How much do you have in place already? (including NHS benefits) 3. What is the shortfall? 4. Are your current policies still appropriate? 5. Purchase the relevant cover If you don't want to do this yourself, employ a financial professional to help you work through the

steps. Once you've done this you and your family will experience fantastic peace of mind knowing that you're covered. And if you'd like our guidance through the steps, feel free to get in touch for an initial no obligation discussion. Over 50 life insurance