Life insurance, as we learnt last week, is there to cover a potential liability if you die, whether resulting from an accident, natural causes or illness. But life insurance cannot help you if you suffer a serious illness or accident and remain alive. Today, therefore, I'm going to teach you about critical illness, income replacement and general medical insurance. They say that medical-related insurance costs a lot. But having none costs more. Let's see if that's true.
Developments in the field of medicine have resulted in many terminal illnesses becoming treatable in hospitals. However, these treatments may be very intensive and lengthy, changing your lives in the process. In order to cover you for these costs, the insurance industry provides critical illness plans which pay out lump sums if you are diagnosed with one of a list of serious illnesses or conditions, such as Alzheimer's, Parkinson's, strokes, kidney failure, comas, paralysis or total disability of another sort. You can now appreciate why this insurance cover may be vital.
A lump sum is paid out normally after diagnosis so that even if you make a full recovery in a short space of time, you will still receive the full amount. In fact, you may need any surpluses after medical treatment to replace lost earnings or, alternatively, you could use it for specialised equipment following your treatment. This type of insurance is a term insurance usually taken out to cover your working life.
Income replacement insurance plans (or permanent health insurance) cover situations where you are unable to work and cannot receive your monthly salary. How can you pay those monthly bills? Whereas critical illness plans will pay you a lump sum, income replacement plans are designed to pay you a proportion (around two thirds) of your regular income or salary for as long as you are unable to work, whether through illness or accident. Like critical illness contracts, these are also term contracts since they are designed to cover loss of working income and will therefore normally run up to your retirement.
Remember that the whole point behind these insurance covers is that unforeseen circumstances can be dealt with - without you having to dig into savings to compensate. Finally, you must consider general medical insurance. Benefits and costs vary widely so when you go through your choices, make sure you examine each one closely and, remember, the lowest premium is not always the cheapest plan. For expats, this is a must-have insurance which, depending on your plan, can cover all in-patient and outpatient expenditure as well as international emergencies so that you are not restricted to where you can receive treatment.
Above all, make sure that your insurer can't refuse to renew your cover regardless of how ill you might become. Imagine what would happen if you were in the middle of a long course of treatment and your insurer refused to renew your annual plan during a potentially life threatening condition. Make sure that your insurer is a member of the International Federation of Health Funds (IHFH). This is particularly important for expats as it will simplify the process of transferring your policy to a participating member in another country without the risks of restrictions to your current cover.
Members of the IHFH include insurers such as PPP International and BUPA International and annual premiums are pretty comparable. It's worth noting that if you also take homoeopathic treatment, you should check carefully through your policy as many insurers now provide cover for such consultations and treatments. Companies may provide expatriates with basic life cover and medical insurance so be sure to check carefully what is on offer before taking out individual cover. You might ask your company if you can add your dependents as well. However, when your employment ceases, so will your insurance covers so do not disregard your own insurance plans: remember, the older you get the more expensive and difficult it is to obtain insurance.
John McGaw is a financial adviser based in Dubai. Contact him at jmcgaw@emirates.net.ae