Insurances

Accident & Sickness Insurance
If you apply for a personal loan, credit card, store card, mortgage or almost any other kind of credit agreement, you are likely to be offered accident and sickness insurance, also known as payment protection insurance (PPI), to go with the agreement.

Is Insurance Necessary For Accident & Sickness?
The basic tenet of an accident and sickness insurance policy is that it will cover the monthly repayments of your debt should you become incapacitated and unable to work as a result of accident or illness. Although insurance policies of this type might appear to be a prudent option, they’re not compulsory. In addition, accident and sickness insurance policies have acquired a poor reputation, in recent years.

Issues Related To Accident & Sickness Insurance
Accident and sickness insurance policies have come under fire for two main reasons:

Firstly, the costs of the policies are often very high in relation to the benefits offered. This results from the fact that financial institutions marketing personal loans or other financial products are in a strong and convenient position to sell an add-on accident and sickness insurance policy at the same time as the main product. In these circumstances the customer would have to make significant effort to source accident and sickness insurance from an alternative vendor, so, in reality, competition in this area is weak.

Secondly, accident and sickness insurance policies are often written in a way that makes them difficult to understand. Furthermore, many policies contain a large number of exclusion clauses that work against the interests of the policyholder when the time comes to make a claim.

The result of this combination of factors is that the margins are very favourable to providers of accident and sickness insurance and can be as high as 80 percent!

Alternatives to Accident & Sickness Insurance
What are the alternatives to accident and sickness insurance?

Critical Illness Insurance
Critical Illness Insurance is a type of insurance policy that will pay a lump sum to policyholders if they suffer serious illness or require certain types of surgery.

Most critical insurance policies include a detailed list of which conditions are covered by the policy. The list is usually quite extensive and can include heart disease, stroke, cancer and kidney malfunction. Some policies include cover for heart bypass surgery and organ transplants.

The main fact to remember with this type of policy is that in order to be covered for a particular condition, it must be included explicitly in the list contained within the policy. Some insurers are willing to add less common conditions to a policy, on request, but this might result in an increase in the premium charged.

Income Protection Insurance
Income Protection Insurance, also known as Income Replacement Insurance or long term disability insurance, offers protection against loss of earnings. This type of policy pays out, usually monthly, for the period that the policyholder is unable to work. Unlike critical illness insurance, income protection insurance policies usually have relatively few exclusion clauses, although as with any insurance policy, it is wise to read the small print before signing up.