Life Assurance and Thalassaemia Some questions answered.
Life assurance involves paying a premium (usually monthly or annually) to ensure that a cash sum is paid in the event of the death of the insured individual. Most policies of this kind are taken out to provide for dependants, for example, a husband who is the family’s main wage earner may wish to provide for his wife and children. Life assurance policies may also be taken out for a specific purpose, such as to pay off a mortgage in the event of a death. There are many types of policy on the market. Here are a few examples :–
Term assurance – this is a life insurance policy which covers the life of the insured person for a cash sum (the sum assured), in return for a payment (usually monthly but possibly annually) known as a premium. This is the cheapest form of life cover. Assurance is provided for the term of the policy only, i.e. the sum assured is payable only if the insured dies within the term of the policy. There is no investment value in the policy.
Policies can cover a single life or be taken on a joint life basis, typically on a “joint life first death” basis. In this case, for example, a husband and wife may take out such a policy to provide for the surviving partner. Some term policies can be renewed or extended.
Whole of life assurance – in this case premiums are paid throughout the life of the insured person and the sum assured is paid out on death. Again, these policies can be taken out on a joint life basis.
Endowment policies – these are savings policies which also provide life assurance. They are for an agreed term, with the minimum usually being 10 years. A cash sum is paid at the end of the term (“on maturity”) or in the event of the death of the policyholder. These policies are usually taken out to repay an interest-only mortgage. However, always remember that an endowment policy does NOT guarantee to repay a mortgage.
Why do people who have thalassaemia find problems getting life assurance?
Under the Disability Discrimination Act 1975 it is unlawful to discriminate against people with a disability in connection with the provision of goods and services. However, insurance companies are allowed to offer different terms to different people according to circumstances. Each time a life assurance contract is negotiated, the insurance company must calculate the risk they are entering into, that is, what is the likelihood of them having to pay out the full sum insured. For example, in a case where no medical condition is involved, a healthy person of 25 wanting a 10-year term policy for £50,000 would pay a lot less than a 60-year-old person taking the same policy, as statistically they are far more likely to survive for 10 years. By the same principle, insurance companies may differentiate between those who have diagnosed medical conditions and those who do not; they can also differentiate between people who have a the same medical condition according to its severity.
Insurance companies look at each case on its own merit. The company must base their calculations on information relevant to the assessment of the risk, which is from a reliable source. This can be actuarial or statistical data, medical research information and medical reports on an individual. If you have a medical condition (such as thalassaemia) which the insurance company, consider to be a high risk, the company can exclude that condition from the policy. It may be possible for a person who has thalassaemia to obtain life assurance, but it is likely to be “loaded” i.e. have a higher premium, as in the view of the insurance company they are taking a bigger risk. It is also more likely to have a restricted term. Basically, if you can find an insurer to give you life cover, the policy is likely to exclude death relating to any existing health problems AND is likely to be very expensive.
It is no longer mandatory to take out life insurance when obtaining a mortgage (although some lenders, especially banks, still demand it; it is also required if you take out an endowment mortgage). When applying for a mortgage, be sure to ask whether life assurance is required so that you have the option of choosing a lender or type of mortgage which does not require it.
It is important to realise that a contract of insurance is taken out according to the doctrine of utmost good faith, which means that you are obliged to disclose any facts which might affect the insurer’s judgement in accepting/declining the contract, fixing the terms or adjusting the premium, even if you are not specifically asked for them. Therefore, always ensure that you provide all the facts on any application and NEVER state a deliberate untruth. If you do the contract is null and void, the policy will not pay out in the event of a claim and you will not get a refund of the premiums you have paid.
You may wish to seek the advice of a reputable Independent Financial Adviser (IFA). IFAs must be registered with the Financial Conduct Authority.