On most days, I have at least 2-3 customers asking me this question – which one is more suitable for me – Short Term Accident and Sickness Insurance or Long Term Accident & Sickness Insurance.
The differences might seem pretty obvious as both short term means that it is a short term policy and long term means it is a long term policy. Unfortunately there is more to it than just the length of benefit period. Very often we have to ask the customer as to why they are considering to buy these policies and see what is their core underlying reason rather than trying to decipher which product is suitable based on high level benefits.
This is not a definitive list of questions, but if you have thought about all these points, chances are that the advisor you speak to – will be able to locate the right policy for you.
1. How much benefit amount you want over and above what the employer is going to pay you (if any)
2. Do you want this benefit amount as a top-up to your employer’s benefit plan or is this the only policy you will have to depend on for your loss of income
3. Are you already paying for any group income protection schemes with your employer?
4. Does your employer offer any group income protection schemes and if yes, do you qualify and what is the price and benefits? Often the group policies can be cheaper and if it is through your employer, making a claim will also be less cumbersome.
5. How long do you want the benefit amount to last when you make a claim – 12 months, 24 months, 60 months or until you reach the age of 65years
6. What kind of cover do you want – “ADL – activities of daily living”, “suited occupation” or “own occupation”. Details of these terms are covered in another post of mine, else you can Google these terms. As you would have already guessed – own occupation is a far more robust level of cover than ADL.
7. Do you want to undergo detailed medical questions before the policy is incepted or are you happy to go through it when you make a claim. In Insurance speak, we call in “underwriting at point of sale” or underwriting at the point of claim”. If you choose to go through all the medical questions before you buy your policy, it is called underwriting at the point of sale. By far this is the most effective way of buying these policies – as it assures you that you qualify and when you make a claim, the discussions are about your claim and not historical medical conditions. Generally most long term income protection policies tend to be underwritten at the point of sale and the short term tend to be underwritten at the point of claim. However there are providers of the short term who underwrite at the point of sale.
8. Your existing conditions – most insurers exclude your existing medical conditions. If you choose a long term, the medical questions will help identify the exclusions and most insurers make it clear from the outset the medical conditions you will not be able to make a claim for. With short term, when you make a claim, the insurers may seek to your GP notes to confirm that you did not have any existing medical conditions. If you choose a short term, it is important to be aware of the exclusions and the time for which you will be excluded from making a claim for your pre-existing conditions.
9. Deferment period or Excess days – some people also call it as waiting period. It is simply the amount of time you are happy to wait before you become eligible for payments from the insurer AFTER you make a claim. A deferment period of 1 day or 3 days is certainly better than 1 month.
10. Conditions that will need a consultant sign off. Many insurers exclude medical conditions such as stress, depression, anxiety, back pain etc from GP notes and will only pay your claim if you have been signed off by a consultant and you continue to be under active treatment with that consultant.
11. Payment dates – might seem pretty obvious but you will be surprised how many customers struggle with direct debit dates. Some customers allow the customers to pick their payment collection date while other are rigid in their approach and have certain fixed dates.
12. Cancellation policy – the last thing you want is to get tied to the insurer with hefty early cancellation fees. It is crucial for you to find this as the last thing you may want it so “pay to cancel” your policy
While the above list is not exhaustive, I sincerely hope it answers some of the questions you may have on this subject.