When we make a decision to insure against the costs of falling ill or being injured, we typically think of private medical insurance.
Private medical insurance is designed to cover most of the costs of higher quality private healthcare when we are sick. Such cover tends to exclude pre-existing conditions and does not cover every single condition. For example, some lifetime terminal conditions may not be included.
It’s easy to pick private medical insurance because we hear so much about it, but were you aware that there are at least 5 other categories of insurance which might be more suitable for your needs?
In this article, I will summon the other insurances which can protect you financially from a loss of income due to ill health, injury or death. This is not financial advice, but simply an introductory guide to the different types of insurance products currently on the market.
Life Insurance
First of all, life insurance is a possible option. Private medical insurance will help cover bills incurred by your ill health, but it will not help ease the financial burden placed upon your family if you were to pass away from the illness. Life insurance is quite a complimentary insurance policy to private medical insurance because there is virtually no overlap in coverage. One assist while you are ill, and the other takes over if you die within the policy term.
Healthcare cash plans
Healthcare cash plans are cheaper, and some would say simpler, versions of private medical insurance. I use the term ‘simpler’ with a caveat, as healthcare cash plans have more detailed T&Cs which you’ll want to understand fully.
A healthcare cash plan pays out a fixed lump sum upon diagnosis of specific conditions, or if you sustain certain injuries. For example, if you lose sight in one eye, you might be entitled to £35,000. If you break a leg, you might be entitled to £3,000.
Each policy has a ‘menu’ of specific conditions and injuries, together with a payout. These lists are quite short, relative to the number of possible maladies humans can be afflicted by. So while they may initially look complete – look for what’s not on the list. Heart complications, diabetes and other long term health issues often do not feature.
Healthcare cash plans are generally cheaper than PMI, as the insurer’s liability is capped at the payout limits (no risk of a patient claiming £700,000 in hospital bills), and the list of conditions is limited. This means that these plans are better to have than nothing, but they don’t give the same peace of mind as a more comprehensive PMI.
Payment protection insurance
Payment protection insurance, famously missold in the UK in the 1980s and 1990s and subject to billions of pounds of refund claims is still alive and kicking. That’s because it’s a very useful insurance product to combine with a mortgage.
Payment protection insurance will offer to cover the monthly payments on specified debt if you lose your income due to a specific list of reasons, including redundancy and illness.
The insurance payment covers the payment, but not the rest of your disposable income.
This effectively makes it an insurance policy against defaulting on debts. This means that if combined with a mortgage, it will significantly reduce the risk of your home being repossessed in the event of you being unable to meet financial obligations due to an unforeseen event.
As you can see from the above – private medical insurance is not the only type of insurance policy designed to help you out if illness should strike. Therefore, it pays to conduct a high level review of what’s available before you begin honing in on a specific provider or policy.