I have two simple questions for you. Could you and your family survive financially if you suffered a serious illness and were unable to work? Even if you could, would it decimate your savings and future plans?
Being diagnosed with cancer, heart disease or having a stroke is something you don’t expect and is often a matter of bad luck, but you can take steps to make sure you and your family can manage without any financial problems, taking away a major cause of stress.
Let me tell you about a true story. This happened to a client of mine.
In December 2019, Jane* found a lump in her breast and went to her doctor. She was referred for tests and a biopsy showed that she had stage 2B breast cancer. Fortunately, she had a good level of medical insurance and was able to start treatment quite quickly. She underwent a mastectomy with reconstruction and radiotherapy. This was successful and nine months later she is recovering well and getting on with her life.
During the early stages and the treatment, Jane’s life was turned upside down. She runs her own business which supports her and her two children and was unable to work. As a consultant, she could not get anyone else to take over and so her income dried up. This was further compounded with the COVID-19 restrictions in March of this year.
Jane had savings and investments but these are earmarked for her retirement and university fees for her children and although she sensibly had an emergency fund, this was only sufficient for a few months. Being ill meant she had to pay for childcare and had other expenses and she could soon be looking at financial problems. Thankfully, in February 2019, we had arranged a life assurance policy that included critical illness cover.
Not long after diagnosis Jane contacted me and we put in a claim under the critical illness part of the plan. Some enquiries had to be made by the insurance company, and medical reports, obtained but a few weeks later, a claim was paid out in full. The sum of $150,000 (AED 551,000) was paid to her bank account. This meant she did not have to worry about her business or her income for some time, and could focus on her health and sons.
The cover that we arranged for her was for a total death benefit of $500,000, including critical illness cover of $150,000. After the claim was paid, she still has life cover for $350,000 and is paying a reduced premium for this. All plans were for a period of 15 years and she was paying $119 per month (now just $52 after the claim) so this is the best money she has ever spent.
Jane was 41 years old when she took out her policies and the same age when she was diagnosed. There was no family history of breast cancer. What this case shows is that a serious illness can affect anyone, that it is really not expensive to set up proper insurance, and that if you are unfortunate enough to be seriously ill, the pay-out will make your life so much easier.
What do critical illness policies cover?
The most common medical conditions for claims are heart disease, stroke and cancer but a huge range of illnesses are included. The list is lengthy but includes many kinds of heart-related issues, motor neurone disease, Parkinson’s, major organ transplant, traumatic head injury, as well as some 200 types of cancer. This is important as cancer represents 65% of all critical illness claims.
The UAE perspective
We are generally an unhealthy bunch in the UAE, compared to many other countries, so that makes it even more important to have the right insurance and good options are available.
Anyone can suffer from a serious illness at any time. It doesn’t matter how healthy you feel, and serious illness does not discriminate by gender, age, nationality or income. The right policy won’t stop you getting ill, but it can certainly take away any financial worries so you can focus on your health.
In Jane’s words: “Knowing that I had money in the bank after my policy paid out was a huge relief and I could take my time to convalesce. I felt 100% fit until I felt the lump and I was sure I wouldn’t need the policy but am so pleased I took advice.”
I previously wrote about this topic in October 2017, and you can find more information on claims in the UAE is that article: Can you afford to have a serious illness? The facts for the UAE
You need to think about life and critical illness cover in the same way as your car insurance. No one questions insuring a car each year but you hope that the premiums are a waste of money and no claim needs to be made. The same applies with personal protection plans. You don’t want to make a claim but bad things can and do happen and if a claim is made this will be the best value for money you will ever see. And remember that you are so much more valuable than a car.
Over many years advising clients, I have sadly dealt with many claims for critical illness and also death claims. Properly set up plans do pay out when needed. And often the proceeds are really needed. I can structure policies to fit your life and your budget so contact me to find out how you can protect yourself and your family.
To arrange a discussion on any aspect of your personal financial planning, please email me at firstname.lastname@example.org
I write articles such as this one as part of the holistic personal financial planning service and that I provide to expats, and the general consumer, financial and legal information that I provide in The National newspaper, on Capital Radio UAE, and on the Facebook group British Expats Dubai.
Please take a look at the other useful articles on this website.
* Name changed to protect identity but a true story.