Protecting clients against the impact of prostate cancer
With Movember now in its final week, it is timely to consider the various insurance policies that may best protect your clients against the financial effects of prostate cancer.
This month marks 'Movember', the annual campaign to raise awareness of men’s health issues, including prostate cancer. Prostate is the most common cancer detected in men, with approximately 20,000 new cases diagnosed in Australia each year1.
Many people may not be aware that insurance can help manage the medical fees and living costs associated with a serious disease such as prostate cancer. The cost of this form of cancer, including lost lifetime earnings, is estimated to be approximately $450,000 for men in the working age bracket3.
There is still confusion about the right level of coverage to assist with a cancer diagnosis. While everyone’s financial situation is different, these five tips will help to guide your clients through the different types of cover on offer.
Living insurance (also known as trauma insurance) can provide a lump sum payment, among other benefits for people suffering from one of a range of specified medical events, including prostate cancer. A lump sum payment could be crucial to helping someone living with the disease, to assist with any financial strain that may come with associated medical and accommodation expenses. Living insurance proceeds can also be used to reduce debt to allow more flexibility with work, such as when working part-time or changing careers.
While most insurers will allow a partial payment for less advanced tumours, the amount payable may be as low as 5 per cent of the insured amount. However, some insurance policies will pay the full insured amount when a non-advanced prostate cancer has been diagnosed and surgery or therapy (such as radiotherapy or chemotherapy) is needed to prevent the spread of cancer.
Total and Permanent Disability (TPD)
In more serious circumstances, if prostate cancer advances to the extent your client becomes totally and permanently disabled as defined under the policy, TPD insurance can pay a lump sum benefit.
There are two main types of TPD insurance – ‘own occupation’ and ‘any occupation’. Own occupation TPD insurance proceeds are payable if your client is permanently unable to work in their current occupation. Any occupation TPD insurance proceeds are payable if they are permanently unable to work in an occupation that they would be suited to with their education, training and experience. Some policies will also pay a benefit if your client is able to work, but in a severely reduced capacity.
An ‘own occupation’ TPD definition is more likely to be met since the definition is more generous. However, own occupation TPD premiums are approximately 50 per cent more expensive than any occupation TPD premiums. In recent years, TPD definitions in many group insurance policies have been altered to be more stringent than those of retail policies, so it is worth checking the exact definition wording.
Income protection (IP)
Through income protection insurance, your client can cover up to 80 per cent of monthly income, assisting with living costs and partly covering lost super contributions.
People often don’t consider how they would cope if they suffered from a disability. The reality is one in three Australians will be disabled for more than three months before reaching 65 years of age4. IP payments replace part of the insured’s income in the event they are disabled due to sickness or injury and unable to work.
IP insurance can provide a monthly benefit that can generally replace up to 80 per cent of your income. This can ensure that bills such as the mortgage repayments or rent, electricity and school fees can be paid, and lost super contributions are partially offset, if your client is temporarily ill or injured. In some cases, IP can be used together with trauma insurance to cover the full amount of income lost.
In addition, some comprehensive IP policies include a crisis benefit that provides a payment equal to six months of the monthly benefit in some situations. A payment may be made if your client suffers from prostate cancer and meets the policy definition.
Look out for insurance policies that offer help for home makers.
The number of stay-at-home dads is on the rise5. If your client is a homemaker, IP insurance can be obtained whereby if, due to sickness or injury, they are prevented from carrying out normal household duties, a benefit may be received which can pay for someone to help with these tasks. If it’s not practical or financially viable for your client’s partner to take time off work to run the household during that time, IP cover for homemakers may be appropriate in some situations.
There is also a TPD insurance policy available for homemakers where a benefit is payable if your client is permanently unable to perform normal household duties. Again, insurance proceeds can be used to pay for someone to perform these duties if they are no longer able to.
Term life insurance
Term life insurance pays a lump sum benefit if the insured dies or suffers a terminal illness. If your client is deemed to have less than 24 months to live, an advanced payment can be made for terminal illness. Not all policies are this generous and may restrict payment to circumstances where your client has less than 12 months to live, rather than 24. BT was the first retail insurer to extend their life expectancy time provision for terminal illness conditions of release to 24 months and has recently released a video explaining the changes.
Claim proceeds can be used to pay off debts and provide funding to allow your client’s family to maintain their standard of living, including continuing to live in their current home.
A prostate cancer diagnosis can often be overwhelming. However, a comprehensive insurance plan can alleviate the stress associated with financial uncertainty, and allow your client to focus on their health and family.
4 Institute of Actuaries of Australia 2007
5 Australian Bureau of Statistics report, Fathers' Work and Family Balance, 4102.0 - Australian Social Trends, 2006
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