Is medical advancement a boon or a curse ??
We are unable to answer this question. Let us discuss or shed some light on modern medicine and its impact on FINANCIAL PLANNING. One thing which I can promise is that after reading the whole article you will get an idea on how modern medicine is changing our lifestyle; the impact which it can have on our financial planning in the future. How Critical Illness insurance can be a life saving boat in Titanic world of investments and life insurance.
Few decades back in Cape Town, South Africa - Dr. Christiaan Barnard successfully performed the first human heart transplant surgery on 3rd December 1967. The patient survived for 18 days, succumbed to pneumonia and died. The next patient survived for 19 months.
Today, there are more than 55,000 heart transplant recipients worldwide and the average life expectancy of a heart transplant recipient has INCREASED to 15 years.
( Source : http://en.wikipedia.org/wiki/Heart_transplant)
Due to sedentary lifestyle , stress and eating habits today, the average age of a person experiencing the heart attack has come down from 40 years to 35 years. Also the average life expectancy has increased drastically from year 1900 to year 2000. An individual tend to live more but with lots of health related issue.
Life Expectancy in the year 1900
Male : 42 years
Female : 47 years
Life Expectancy in the year 2000
Male : 73 years
Female : 79 years
(Source: National Vital Statistics System – Life Expectancy table)
Medical science, during these past 100 years (1900 – 2000), has advanced and evolved tremendously; and so have the causes of death. A century ago illnesses which were considered dangerous and fatal are not significant anymore.
CAUSES OF DEATH – 1900
• Pneumonia 12%
• Tuberculosis 11%
• Stroke 6%
• Heart attack 5%
• Accidents 5%
• Infancy 4%
• Cancer 4%
• Others 53%
(Sources : Life Table 1900 – 1998)
MAJOR CAUSES OF DEATH (Present)
• Heart Disease 28.9%
• Cancer 22.9%
• Stroke 6.8%
• Alzheimer’s Disease 2.2%
• All others 39.2%
(Source : National Vital Statistics Report – 2003)
What are the main reasons that contribute to the major causes of Death (present) ?
Stress
Cholestrol
Obesity
Blood Pressure
Diabetes
- STRESS : Stress is a major cause that leads to heart attack and cancer.
- CHOLESTROL : Do you know which is the largest selling medicine right now ? It is Lipitor, a medicine to control your cholesterol. People with high cholesterol run a 50% higher risk of stroke or heart attack before the age of 65.
- OBESITY : Obesity has reached epidemic proportions globally, with more than 1 billion adults overweight at least 300 million of them clinically obese - and is a major contributor to the global burden of chronic disease and disability.
- BLOOD PRESSURE : High blood pressure is the main risk factor for stroke and a major risk factor for heart attack, heart failure and kidney disease.
- DIABETES : Diabetes is the fourth leading cause of global death by disease.
Thanks to modern medicine we are living longer in spite of all these problems and life style changes.
Facts at a Glance / Some horrifying statistics :
- More than 2 out of every 5 die of cardiovascular disease. Today more than 1 in 5 die.
- 1 in 9 women will develop breast cancer at one point in their lives.
- In UK every 2 minutes someone meets with a heart attack.
- 1 in 2.4 men and 1 in 2.7 women will develop cancer during their life-time.
- 1 in 11 men and 1 in 18 women would develop lung cancer.
But than what happens to the person who suffered from the Life Altering / Life Threatening Diseases ???????????
???????????? Do they survive ????????????
##### The Good News is that … Yes they do survive.....
Heart Attack : 75% of men will survive their first heart attack for 5yrs
Stroke : 33% are left with serious disabilities, and the balance will recover.
Cancer : 50% of Cancer patients will survive for a minimum of 5 yrs
60% of women with breast cancer will survive more than 5yrs.
(Source: Munich reinsurance company 2005)
Heart Attack : Estimated 1.1 million heart attacks in 1995.
22% will not recover completely, 88% will be able to return to work.
Stroke : 4 million survivors in the world today. Survival has increased almost 700% since 1950
Cancer : 5 in 10 patients diagnosed with cancer this year are expected to be alive 5 years later.
(Source: American Heart Association – 1998)
It is a great news what modern medicine has done. Today we see more and more people surviving illnesses and diseases which were considered dangerous and fatal 50 years ago. We are living longer. We have been able to conquer some of the illnesses which were 100% fatal a few decades ago.
If someone had a heart attack 50 yrs ago, it was simple heart attack and he died. There was no financial planning required.
But today the situation is different. As we have seen, there is a high probability of someone being diagnosed with a critical illness, and then there is a very high probability of his survival.
Doctors will make sure the patient survives ...... and ......
###### the Bad News is that Survival comes with a HUGE cost.
• Loss of income – both incomes
• Change in Career
• Childcare
• Change in lifestyle
• Private duty nurse
• Home renovations
Do you Know !!!!!!!!!!!!!!!!!!!!!!
Globally
• 1 in 3 people develop cancer sometime in their life1
• By 2010, another 1.5m people worldwide will be told that they have breast cancer
• Women have a 1 in 4 chance of suffering a critical illness between the ages of 30 and 65
• Diabetes is the fastest growing debilitation in the world2
Sources :1 Cancer Research 2(Abu Dhabi Health Authority 2007)
In UAE
• The UAE has the 2nd highest rate of diabetes in the world
• Road accidents are the highest cause of death in the UAE
• Life expectancy is just 73.4 (men) and 74.5 (women) in the UAE*
• Cancer is the third leading cause of death in the UAE after cardiovascular disease and trauma
• 60% of UAE nationals are now clinically obese, with an estimated 1 in 5 children overweight.
Sources: *Abu Dhabi Health Authority 2007
More concerning statistics...
- The UAE's mortality rate for heart disease is 22 per cent1
- Road accidents in the UAE for the first half of 2009 have increased by 11.5 percent but fatalities dropped by 2.6 percent2
- Lung cancer stands as the fifth type of cancer across the UAE, with breast cancer in the lead, followed by colon cancer and then lymphoma/leukemia3
- “If you have a heart attack in this country, even in Dubai, then your chances of survival will be far below the average offered in more developed countries”4
- After the UAE, the next highest rates for diabetes occur in Saudi Arabia (16.7 percent), Bahrain (15.2 percent) and Kuwait (14.4 percent) 2
- Fifty percent of people with type two diabetes don’t even know they have it1
- In 2009, the suspected indicator is expected to be for every 100,000, 6.8 people will be killed in a road accident 2
- According to statistics, there is a 15 per cent increase in the number of accidents resulting from jumping red traffic signals2
- There is a significant increase of over 45 per cent in the number of accidents due to sudden swerving2
- More than 700 cases of cancer are diagnosed in Abu Dhabi each year3
Sources:
1 International Diabetes Federation,
2 Dubai Police Traffic Department
3 Abu Dhabi Health Authority 2007
Today more and more people are surviving these illnesses and living longer.
Think about it .............. !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
We have discussed about living longer, we have discussed how life expectancy has increase for the last 100 years, how causes of death have evolved from typhoid, cholera, malaria to Heart attack, stroke, cancer etc. We have discussed how advances in medical technology mean life-prolonging cures and operations are becoming increasingly available.
Is there anything which I can do about it ? !!!!!!!!
Let us look out for a solution called as “ Critical Illness Insurance”.
What is Critical illness Insurance ???
Critical Illness insurance is an indemnity insurance which pays the face amount of the policy to the insured in a LUMP SUM upon the diagnosis of specified illness
This was designed by Dr. Maurice Barnard, brother of Dr. Christiaan Barnard. Few illnesses which are normally covered in Critical illness insurance plan are :
1. Heart attack
2. Stroke
3. Life threatening cancer
4. By-pass surgery
5. Major organ transplant
6. Alzheimer’s disease
7. Multiple Sclerosis
8. Renal Failure
9. Paralysis
10.Deafness
11 Blindness
Why is it important for everyone to have a Critical Illness Insurance Plan?
Statistically, 1 in 4 men and 1 in 5 women will contract one of the illnesses covered by a standard Critical illness product before they reach age 65. The probability of suffering from cancer , heart attack and stroke etc. are very high and chances of survival have been consistently increasing. today, the average age of a person experiencing the heart attack has come down from 40 years to 35 years.
Life Insurance hopefully will take care of the family of a person in case of a death claim but those who survive long could potentially face severe financial hardship.
We have 80% of people losing their homes because of major illness and only 20% because of death.
Medical Insurance will hopefully take care of all the direct expenses of the Hospitals and Pharmacy bills. But the Lump sum money which comes upon the diagnosis of Critical Illness might help them to take care of liabilities and responsibilities of family.
If you suffer a serious illness, the medical profession will look after your physical recovery. Your friends and family will look after your emotional recovery. But who will look after your financial recovery? Having a Critical Illness Insurance can offset some of the financial stress and help an individual focus on recovery.
We have worked all our lives to provide a good living for ourselves and our family. We earn so that our family can live a comfortable life-style, children’s can go to a decent school, we provide them best home and all the comforts and love. Life insurance makes sure that in the event of premature death our families can continue enjoying the same standard of living that we are providing today.
But what if God is kind and we only die a little bit. We cannot go back to work anymore. What happens to the life style we and our families have become so accustomed to?
What is our most important ASSET ?
It is “ OUR ABILITY to earn an INCOME ”. We go to work to generate an income for ourselves and our family.
A critical illness plan protects THAT income. We need critical illness benefit NOT BECAUSE we are going to die but because we are going to LIVE !
What is the difference between health & medical insurance and a Critical Illness Benefit?
Your medical insurance pays for your ongoing medical expenses. A person meets with a heart attack; the medical insurance company will pay for all the covered expenses in the hospital.
Your critical illness benefit on the other hand is one time lump sum payment upon diagnosis of illness. It does not depend upon severity of the sickness. One could have a heart attack or cancer or stroke; the critical illness benefit will pay the entire amount, as long as, under the medical terminology it is classified as a critical.
So should we replace medical insurance with critical illness insurance?
Absolutely NOT. Both are different benefits. They complement each other.
How much is enough critical illness benefit ?
Consider the following questions to assess how much critical illness insurance is required :
- What is your monthly income?
- What is your monthly expenditure / mortgage repayments / life assurance policy contributions / retirement fund arrangements / school fees / food, cloths, entertainment etc.
- How much critical illness is needed if you had stopped working yesterday, how long can you maintain the same life-style without an income?
- How much do you require to keep the house that you live in?
- If you are in business, how much is your monthly payroll?
What are the benefits of including Critical illness in our Financial Planning ?
- This Critical Illness Insurance Plan provides Lumpsum funds.
- To retrain for a less stressful career and lifestyle.
- To reduce or eliminate debts.
- To move the “retirement” horizon forward
- To continue business as usual.
- To provide the best possible health care, even if not covered by a health plan.
- Helps you pays off your mortgage balance if you suffer from any of the Critical Illnesses such as a heart attack, stroke or cancer.
- In the event of a Critical Illness, you can be rest assured that all your routine financial obligations are met.
We have discussed the importance of having this critical illness benefit, and the probabilities. Now you must be wondering how much you need to contribute for this security – this living benefit.
Actually, it costs more if you DO NOT have critical illness benefit.
Your premiums are based on your age, sex and health. Factors like smoking and family history play a very significant role in your critical illness benefit. People with family history of diabetes or heart attack or cancer run a 40% higher risk of contracting one of the 3 major sicknesses.
Critical Illness is costly living benefit and since the probability of claiming on a Critical Illness policy is much higher that Life Insurance the cost of the policy is also higher.
Critical illness insurance is becoming more expensive than a life insurance because with medical advancement and because of which chances of survival are higher today. People are living longer on account of improvement in medical science and healthcare facilities. The cost of critical illness rider is about 90% to the cost of life insurance cover.
Many offshore insurance companies now have a Return Of Premium (ROP) feature available by way of corresponding cash value at the end of certain age (usually 65 or 75 ).
In simple terms if you reach a certain age (usually 65 or 75) and do not make a claim you will receive all your premiums back without any interest and tax free. You will be paying an extra premium for this feature however many believe it’s generally worth it.
Types of Critical Illness Insurance:
There are mainly 2 types of Critical Illness Insurance available.
1. Whole of Life Unit link Insuance plan …. up to age of 95 years
2. Term plan up to age of 65 years
Example:
1. Assume $100,000 Death Benefit & $ 50,000 Critical Illness Benefit. If you suffer a critical illness and make a claim you would get $50,000 as an advance to Death Benefit and would have $50,000 remaining as death benefit. When you die your beneficiary will get the remaining $50,000.
If you do not make a Critical Illness claim your beneficiary will get the full $100,000.
This type of plan is becoming more popular as the cost is much lower than individual term individual policies for critical illness.
Few of the offshore companies which offer this kind of unit link Critical Insurance in Middle East for expat community are “Zurich International Life” and “Royal London 360” upto a limit of $ 750,000. The individual can enter into a contract till his Age 60 (last Birthday).
2. In India ,almost all private insurance companies are offering a Critical Illness riders that covers 3 major illness ie. Heart Attack, Cancer and Stroke … along with other critical illnesses.
Star Health Insurance are offering a health insurance policy “Senior citizen red carpet health insurance” aimed specifically at senior citizens. It provides cover for anyone over the age of 60 and permits entry right upto the age of 69 with continuing cover after that.
Do check in http://www.starhealth.in/ for the rates.
On the other hand, Bajaj Allianz General Insurance is providing a Critical illness Plan from IRs 1,00,000 to IRs 50,00,000.
Do check in http://www.bajajallianz.com/ for the rates.
Couple of other private insurance companies like ICICI Lombard, Iffco-Tokyo General Insurance , TATA AIG etc. & Life Insurance Corporation. also offers a critical illness insurance plan.
Since the claims for Critical illnesses are rising, many insurance companies offering a term rider are not guarantying the premiums. The premiums are regularly being reviewed based on claims ratio after every 5 years.
Critical Illness Insurance can't help heal the heart attack /stroke/ cancer but it certainly could mean that financially, things were OK.
Critical Illness Insurance is not cheap, but it is an essential part of family financial planning.
Friends I urge you to look into this on a serious note. At times we get caught up in our day to day affairs that we forget or overlook some of the important decisions that can have a major impact on our lives and the lives of our clients families.
Some of the practical powerful phrases which can help clients take decision :
- “ Ten years of savings could be wiped out with one year of sickness.”
- “ Don’t Predict the FUTURE …… PROTECT it .”
- “ We need insurance not because we are going to die but…because we are going to live”
- “ Doctors might save your life but we might lose our Life Savings”
Conclusion :
- "It is better to be prepared and not to have an opportunity rather than have an opportunity and not be prepared"
- Its not the question of …" If " Critical Illness happens … It’s a question of “ When” Critical Illness happens ………????
I hope I have been able to shed some light on the most important area of Financial Planning which is very close to my heart and something I truly believe in!
Critical Illness : Modern Medicine changing the Game Plan
