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What is the one product your client can’t do without? The answer may surprise you

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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 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.

The financial damage doesn’t end there. Potentially the biggest expense — one that can prove catastrophic for individuals and families — are drug costs. The most expensive of the pharmaceuticals are cancer-fighting chemotherapy treatments taken orally.

Lest you missed it, the CBS news program “60 Minutes” featured an October 4th segment on chemotherapy drugs. The numbers discussed were, well, enough to make you sick to your stomach.

A physician interviewed in the piece, Dr. Leonard Saltz, the chief of gastrointestinal oncology at Memorial Sloan Kettering, says many new cancer-fighting drugs are priced at “well over $100,000.” Add to this to the fact many cancer patients need more than one chemotherapy prescription and you’re looking at (assuming $125,000 per drug) a quarter-million dollars in drugs costs “just to get started.”

Wow. That tab is more than enough to send most middle income folks into bankruptcy, not to mention the poorhouse. Though cancer patients prescribed these drugs may recover physically, the “financial toxicity” of the treatments can prove devastating.

Absent changes to public policy that might help to mitigate the astronomical prices of chemotherapy drugs or other treatments, many patients suffering from a critical illness have, sadly, no recourse but to pay in full for the prescriptions if they hope to survive.

That is, unless they have critical illness insurance. Even the least expensive CI policies can go a long way to reducing out-of-pocket expenses.

I personally own a bare-bones Aflac cancer policy that covers out-of-pocket doctor and hospital bills, plus a portion of out-of-pocket drug costs. I also own an inexpensive Unum policy that pays a $25,000 indemnity for several non-cancerous critical illnesses.

These types of CI policies need to be part of your financial protection toolbox. Otherwise, all of the other planning you do for your clients could be for naught.