For instance, if a policy was taken out for £12,000 a year to cover the cost of raising children until the age of 21, if a claim was made when the children were aged five the policy would pay out £1,000 a month for 16 years (£192,000 in total), whereas if a claim was made when the children were 18 years old, the policy would pay £1,000 a month for three years (£36,000 in total).
Policies can also be inflation-linked which would increase the payments over the years.
When providing cover for day-to-day costs a regular monthly amount is often much easier for families to manage, than trying to make a lump sum last for as long as they need it to.
9. The ability to pay for care costs.
The cost of care is a huge issue for many families in terms of being able to plan their finances effectively.
Several insurers have launched or intend to launch products along these lines that fall somewhere in between critical illness cover and long term care, including Zurich and AIG.
VitalityLife launched its LifestyleCare Cover product last year, which offers people the ability to access their whole of life policy early if they need to pay for care.
People can choose up to 100 per cent of the sum assured to be available for care costs, and cover can be topped up after a claim so that the whole of life cover remains in place.
Tony Mudd, divisional director at St James’s Place Wealth Management, said: “The cost of care in later life is something many clients are worried about and it is very topical at the present time.
“LifestyleCare Cover offers a great opportunity to address this concern and opens a whole new protection market for our advisers.”
10. The value of partial payments.
Partial or additional payments under critical illness plans are now common place across the industry, paying up to around 25 per cent of the sum assured, up to around £25,000, for claims such as early stage cancers.
However, the impact of a partial payment can differ as to whether the overall sum assured remains in place, or the claim is deducted from the total, so it is worth comparing this between insurers.
London and Country’s Mr Hollingworth commented: “Knowing that they would still receive a partial payout without losing cover in the future helps to underline the wider policy benefits as well as providing a valuable lump sum, hopefully aiding a period of recovery for the client.
“In addition they haven’t lost cover in case of further more serious diagnosis in future.”
