Dread disease cover for lower income groups

Those earning low pay still have high need for dread disease insurance cover, according to leading life assurer Liberty Life.

Statistics show that those at the lower end of the income spectrum suffer disproportionately from the four major critical illnesses: heart attack, stroke, cancer and coronary artery disease.

Andrew Warren, Business Development Executive at Liberty Life, says critical illnesses have a great impact on low-income households.

“When the breadwinner of the family is struck by a critical illness, low-income families are the least prepared to deal with the consequences,” he says.

“The family must then direct time and scarce resources to the care of the sick family member. This means a further reduction in the family unit’s ability to work and earn income.”

Dread disease cover can be packaged in many ways.

Warren explains: “Dread disease can even be sold as an accelerated benefit on a funeral policy. Family members would rather receive a benefit that improves the quality of life for a chronically ill loved one than a lump sum after death.”

However, lack of knowledge about the dread disease product can lead to it being sold as an inappropriate substitute for income protection insurance.

“Relying on dread disease cover for income replacement leaves the family vulnerable to many events that could disrupt the ability to earn income such as car accidents or job-related injuries,” says Warren. “Dread disease cover is also not an appropriate alternative for health insurance.

“In another fast-emerging trend, people are replacing regular medical insurance with life insurance policies that come with critical illness riders. Agents must inform customers of the specific risks that are covered and the benefits provided by dread disease products.”

Liberty believes the ongoing evolution in the dread disease market will see this product gain more popularity in the low income segment. Companies are now issuing policies that cover an expanded set of diseases that impact the lower end of the socio-economic spectrum. In addition, customers are expected to gain confidence in the product following the advent of standardised definitions of disease.

Warren adds: “The low-income market represents an untapped market segment for insurers.”