bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

helpersCheckIsPostiesArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

moreOnThisArticles

urlAlias

commentCount

authorLocations

authors

paywallTypes

corrections

sponsorType

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

socialHeadline

headline

flag

firstTopic

glossary

flattenTypeIds

publishedDate

additionalInfoBoxes

images

image

relatedLinks

relatedNewsletters

__typename

createdDate

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

SCMP Reporter

'LIVING life insurance' is the name given to one of the more recent developments in the insurance industry.

  Other terms, such as 'critical illness' or 'dread-disease' cover are more graphic descriptions of this increasingly popular alternative to conventional life insurance.

  Most people own a life insurance policy, but would be hard put to tell you why they bought it.

   In fact, very few people have consciously gone out and bought a policy.

 Most have been sold them after a chance call from an insurance agent who managed to impress on them the necessity to prepare for death.

  The major resistance most people have to buying life insurance is that - as far as we know anyway - there are few benefits in it for them personally.

  But critical illness insurance has changed all that, making it a good example of an industry moving with the times.

  What is critical illness insurance?    If you are diagnosed as suffering from one of the illnesses specified in your policy, the insurance company will pay up.

   In other words, your life insurance matures while you are still alive.

  Illnesses covered are usually terminal but access to a large capital sum can sometimes prolong life expectancy or, better still, provide the level of medical care that may lead to a 'cure'.

  Typically, all critical illness policies will cover you in the event of a heart attack, bypass surgery, kidney failure or cancer.

   As a rule of thumb, the illness will need to reduce life expectancy for a claim to be successful.

  As the market has developed, so too have the range of illnesses covered. Some companies offer cover for up to 30 different conditions, including Alzheimer's disease.

  Importantly, you are not obliged to use the money on medical care. Initial research shows most claimants spend it on luxury items such as holidays.

  The likelihood of surviving a heart attack is reasonable and many people go on to live lengthy lives, albeit at a reduced pace. The benefit of having a policy that will pay out is therefore considerable.

  As you know, nothing is free and premiums on critical illness policies will be in the region of 175 per cent of conventional ones.

  This reflects the fact you are more likely to make a claim than would be the case under a normal life policy.

  A variation on critical illness is extended care insurance. This is designed to provide a cash sum for elderly people who cannot look after themselves.

  It will normally pay out once the policyholder has reached 65 and is unable to dress him or herself, cook a meal or move around the home unassisted.

  Given that medical insurance will not cover the cost of alterations to a property or employment of a part-time or full-time nurse, this type of cover has special advantages.

  When buying these policies, it pays to shop around. You should always ask for a copy of the policy provisions and an explanation of what is not covered. The small print should be properly examined.

  Finally, when determining how to pay for your policy, you should always take into account your plans for retirement.

  There is little point in taking out a policy that will continue to take US$1,000 (HK$7,733) per month from your income after you have left work.

   Most policies provide the option either to limit premiums to a certain age (ideally, your intended retirement date) or alternatively to stop paying premiums at some unspecified date in the future.

  The latter option should always be handled with care as it presupposes the policy will acquire a certain value and that interest-investment returns will remain at a certain level. As always, a conservative line is unlikely to lead to disappointment in the future.

Patrick Tuohy is a director of Tresidder Tuohy and Partners (HK) Ltd.



Life policies address a critical issue