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October 17, 2014 at 10:52 AM
The independent financial professional survey appearing in this issue, sponsored jointly by LIMRA and NUL, offers a valuable window into the current state of the distribution channel. The data-rich report provides much insight into the products independent advisors offer, but sidesteps solutions that many IFPs are leaving out of their portfolios.
Among them: critical illness (CI) insurance. Though more insurers are rolling out CI offerings, they remain little understood within the advisor community. And, as a result, the products are undersold, most especially to people in the middle market for whom CI could be a financial lifeline.
That needs to change — and soon. Often confused with health insurance, CI provides coverage for medical- and non-medical related expenses that health insurance plans don’t cover. These include deductibles and out-of-pocket expenses that, depending on the plan, can be significant.
The better health insurance policies, like my employer-sponsored plan with United Healthcare, limit personal costs (for my situation) to manageable levels. The plan caps out-of-pocket doctor and hospital expenses at $2,500 per individual and $5,000 per family; and at $6,350 and $12,700 per individual and family for prescription drugs.
Other health plans have higher limits for doctor and hospital costs. Maximum out-of-pocket costs for PPACA-approved HealthCare.gov plans for 2015 are $6,600 per individual and $13,200 per family.
For those on a tight budget, these are financially burdensome sums. A 2013 Sun Life Financial survey pegs average out-of-pocket costs for a critical illness at $7,500. Two-thirds of workers who experienced a critical illness had to make financial sacrifices to meet uncovered medical and non-medical costs, despite owning health insurance.
Add to these other costs resulting from a critical illness — cancer, heart attack, stroke, kidney failure, among other life-threatening conditions — that can boost the financial tally to sky-high levels.
To name a few: hotel and travel costs for medical care received at an out-of-state facility; home attendant and child care costs for individuals unable to perform activities of daily living; plus lost income, both for the individual suffering from a critical illness and (in many cases) for a spouse taking time off to provide emotional or other support.
