Here is a link to an interview I did this morning with Ian Guider on Newstalk, we discussed coping financially in the event of a serious illness.
Skip forward to 7 mins 15 seconds to hear the piece, I have also added a blog below.
I have spent 15 years building financial plans for clients, how to invest assets, how to invest surplus cash, pensions savings and so on.
People really do get to see into their financial future but a key part to any financial plan is testing how robust the plan is if somebody dies or gets sick.
There’s no point in having a 40 year plan if you’ve no income for a few years in the middle due to an illness.
Being diagnosed with a serious illness is something we all hope will never come to our door but the facts are startling. If you think of two couples, any two couples, statistically one of those couples will be visited by a serious illness.
You are 5 times more likely to suffer a serious illness than you are to die during the term of your mortgage, we all see the importance of life cover but according to a recent UK Yougov poll only 7% of people take out serious illness cover.
Thankfully there are lots of routes you can go to try and prevent a financial crisis at the time of a medical crisis.
There is a set of stats somewhere that proves you will recover quicker if your finances are stable during your medical crisis. But you don’t need stats; just think of all the celebrities who have beaten illnesses, I bet it’s easier to fight your illness if you’ve no financial concerns.
The first thing I recommend is that a family should have 3 times the monthly household take home pay available to them at all times for any kind of emergency good or bad. Make that 4 times if you’re self employed. If you don’t have the cash available you should consider things like credit cards or credit union loans that you could draw on if you needed to.
You should check the fine print of long term investments and make sure you can get at investments without penalty in the event of a serious illness.
There are lots of different types of cover you can take out; PPI, income protection and serious illness cover.
PPI or mortgage/loan repayment protector is a type of plan that if you are unable to work makes the monthly repayments on your loan for a specified period of time, usually 1 year. I am not a fan on this type of product for several reasons I won’t go into here.
Income protection or Permanent Health Insurance pays you up to 75% of your income (less any social welfare) until either you return to work or you retire whichever happens first.
Serious illness or critical illness cover pays you out a tax free lump sum if you are diagnosed with a serious illness.
Serious illness and income protection are different in that one pays a lump and the other pays an ongoing income. They often pay out for similar illnesses but income protection only pays out if you are out of work for a prolonged period where as serious illness pays out on diagnosis.
There are also certain things that would be covered on one but not the other, for example approximately 25% of income protection claims are for mental health reasons, where as this would not be covered at all under serious illness.
75% of claims paid out under serious illness are for cancer heart attack and stroke. If you narrow it further 75% of female claims are for cancer.
But what if you are unfortunate enough to get a diagnosis without having made any provision; The good news is the banks are, contrary to what people might believe, quite compassionate. You need to engage with your lenders quickly to limit the damage and help improve your chances of getting a positive outcome.
Be aware the banks have processes that they must adhere to and you won’t be able to skip any of the steps however once you have provided the documentation required I find that the banks are extremely reasonable.
I would suggest if you have been diagnosed with an illness and are suffering financially you should talk to an expert who can guide you through your own options.