Insurance World

Health insurance is designed to protect against loss of income and expenses for medical care. There are two broad categories of health insurance policies: disability income policies and medical expense policies.

Disability income policies can also be referred to as loss of income, loss of time or replacement income. This type of policy will pay benefits to an insured who is disabled and can no longer work to earn a regular income. Payments can be weekly or monthly depending on the policy.

Medical expense policies are represented by a wide range of coverage from very minimal to comprehensive packages with multiple coverage. Some include both accidents and illnesses, various hospital expenses and other costs pertaining to medical care such as accident and sickness policies, hospital-stay policies, basic medical expense policies and major medical expense policies.

Any of these policies might cover various combinations of the above and may be paid in a lump sum.Some policies cover only accidents and not illness. As you might imagine, policies like this are very specific about what is considered an accident.

It is important to understand what is defined as an accident as it pertains to the health insurance industry: an accident is an event that is unforeseen and unintended.

Keep in mind that any discussion of this type of policy also applies to any type of policy that includes accidental coverage, not just accident specific policies.

Accident benefits are most commonly paid for accidental loss of life (also called accidental death), accidental loss of limb or sight (dismemberment), loss of time and/or income, hospital expenses, surgical expenses, and medical expenses like visits to the doctor.

Accidental death benefit can also be referred to as “principal sum.” This type of coverage should not be confused with life insurance. There is a world of difference between the two. Life insurance policies will generally be paid regardless of the cause of death. An accidental benefit is paid ONLY if the death is accidental as opposed to a death by natural causes or illness.

The person who receives the death benefit is called the beneficiary. The policy owner has the right and responsibility of naming beneficiaries. Usually there is a primary beneficiary however he/she can assign a second and even a third beneficiary.

The primary beneficiary is the first person in line to receive the benefit in the event of the death of the policy holder. The policy owner can also name a second beneficiary who would receive the benefit in the event the primary beneficiary dies before the insured. Some policies can include a third beneficiary who would be in line after the first two.

There is another important element in regard to accident policies: An accidental death may not be instant. A person can die as a result of an accidental injury months after the accident occurrence. Read your policy carefully because most stipulate that the accidental death benefit will only be paid if death occurs within three months of the accident.

If you manage a small business you’ll dread the possibility of a member of your team being be taken seriously ill or dieing. Apart from the personal upset, your business would be hit hard. Sales or production could take a dive, key skills could be lost and the general pace of the business could fall. All this costs the business money.

Insurance is available to offset those financial risks, risks that can be especially serious for smaller businesses. After all in smaller businesses other employees can’t be moved across to fill the gap - there’s simply no one spare. So the problem remains until the person either returns to work or is replaced.

If the person is off sick with a serious illness such as a stroke or a heart attack you simply don’t know when, or if, they’ll return to work. It could be a month, six months even a year or more. Management is then caught in a cleft stick. Do you take on a temporary employee, contract out or recruit a permanent employee? Or are you forced to tread water and wait for matters resolve themselves? That’s risky. And how much will all this cost the business in terms of extra overheads, lost sales and profit?

Keyman Insurance has traditionally absorbed these very real financial risks but nine out of ten small businesses still don’t carry that insurance. It’s either because they haven’t addressed the problem or they’ve found Keyman Insurance to be too costly.

A Simon Briault, a spokesperson for the Federation of Small Businesses said, “In an ideal world, small firms would be insured against everything, but reality demands the businesses prioritise threats and occasionally take risks”.

But there is a cheaper alternative. It’s called Group Critical Illness Insurance. And it’s about half the price of normal Keyman Insurance!

With Group Critical Illness Insurance, the management decides which employees to insure and how much to insure them for. The business then pays the premiums and receives any lump sum payout. A claim can be made as soon as any of the insured employees are diagnosed with any critical illness which is scheduled within the insurance policy. As you would expect heart attacks, strokes and cancer are the biggest three biggest reasons for a claim but the full list of insured critical illnesses is much longer. For example, kidney failure, meningitis, paralysis and even blindness.

The important point to realise is that to make a claim, the insured employee must survive at least 28 days after their critical illness is diagnosed. (Some insurance companies have now reduced this to 14 days so please check before you buy.) Therefore, if the employee were to die before the end of the survival period, any claim would be invalid. In that context, it’s not as comprehensive as full Keyman Insurance – but at around half the price of there has to be some compromise!

Simon Burgess, the MD of British Insurance says: “Group Critical Illness Insurance is a real alternative to full Keyman Insurance - and at around half the cost, it’s great value for money. If managers find Keyman Insurance too expensive there’s little excuse for not covering the biggest part of the risk with Group Critical Illness Insurance. Don’t pay the price for apathy”.