CI should be 'affordable add-on'
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Critical illness cover needs to reinvent itself to become an affordable add-on to life cover, according to Bright Grey.
Proposition director Roger Edwards says when the mortgage market was flourishing, CI carved itself a niche as a debt-repayment policy that would pay off the mortgage if the policyholder became ill.
He says: “As the mortgage market has fizzled out, rates for life cover have plummeted while CI rates have not. CI has lost its way.”
Edwards says the average premium for £100,000 worth of life cover is around £12 or less but when CI cover is added the premium goes up to about £80.
He suggests the answer could be a CI policy providing £25,000 worth of cover rather than the full £100,000, which would be likely to add another £12 to the original premium.
He says: “Offering CI on this basis would make it much more affordable for everybody. We have got to get out of this mindset that CI has to be all or nothing. One alternative would be to offer CI as an affordable add-on. There needs to be a shift in thinking among both advisers and providers, as we already have the flexibility to do this.
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Readers' comments (1)
Ben Heffer | 12 Nov 2010 12:18 pm
This is a flexible approach to addressing affordability, but I wonder if we would essentially be asking clients to guess what their financial needs might be. Some people are able to support themselves financially to some extent following a critical illness and therefore a lower benefit might be eminently suitable. Others may not be able to work again and they would require a significantly larger lump sum to generate sufficient income. IP may be better for protecting lifestyle.
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