Because critical illness insurance pays a fixed sum in the event of a policyholder suffering a serious medical condition, clients can focus on getting better without worrying about their financial situation.
Advances in modern medicine mean that once life threatening diseases are not longer life threatening. For example, New Zealand statistics show that 50 percent of first time heart attack sufferers will survive.
The medical profession can put you on a heart/lung machine, replace your heart, increase your life expectancy?but it cannot pay your bills for you.
Why do our clients need critical illness insurance? They need it not because they are going to die, but because they are going to live.
In 1993 one of my best friends was made redundant from his tutoring job and went back to his old trade as an auto electrician. Paul was good at his trade but was starting out in a brand new business for the second time and was doing pretty well. At the age of 45, with two young sons, he was healthy.
In July 1995, I twisted his arm and we arranged some disability income (DI) coverage for him. A few month later, Paul’s wife Marie, who is a radiographer, didn’t feel comfortable about the medical advice her husband was being given and suggested that he have a colonoscopy. The results showed that there was a malignant tumor in the bowel and less than a week later, Paul was on the operating table. The cancerous tumor was removed and he began a long process of recuperation.
Paul didn’t have a mortgage, but he has two young sons and a wife who worked only part time. Luckily, we had the DI coverage in place. We should have had critical illness as well. This would have paid a lump sum that would have provided so many things that the family needed, including luxuries that would have accelerated his recovery. The family struggled financially but survived. DI pays out 75 percent of income but where does one make up the other 25 percent?
By the way, Paul is my sister-in-law’s husband.
In 1994, one of my clients, Stewart, was walking down Lambton Quay, the main street in Wellington, the capital of New Zealand. He started to experience chest pains. He couldn’t keep up with his business colleague, who suggested he go and see a doctor. He saw a doctor who suggested that he have an angiogram, which indicated that three arteries in his heart were substantially blocked. Two weeks later Stewart had a triple bypass operation.
He had no DI in place and no critical illness insurance. For the next five years he struggled in business as his health vacillated and finally, two years ago his cardiologist told him that he would have to stop work or else his angina would kill him. Luckily we had some TPD (total and permanent disability) coverage in place, which paid out a lump sum a couple of years ago.
If we had a level of critical illness coverage in place in 1994, he would have had more options. He would have paid off his mortgage, overdrafts and business debts. All of these probably contributed to his stress level and heart problems. He would have had some money to put in the bank to help him with his recovery. Stewart was born 10 years earlier than me and is my brother. You too know clients, friends, relatives or acquaintances who have had some form of critical illness or major trauma. Think of those who have or have had cancer, a heart attack, heart bypass, or stroke. These are the main four traumas critical illness insurance covers. Just remember what effect these conditions had on those families without taking into account the financial considerations.
But the financial considerations are significant. Do they have a mortgage? Do they have credit card debts? Americans owe tens of thousands of dollars in credit card debt. If they are in business, do they have business debts, overdrafts or lines of credit?
My final case study relates to a client I have looked after since 1976. Kathryn has always done what I have recommended, and never balked at the price: She has always seen the need for the superannuation plans we have suggested would provide a well- funded retirement. Kathryn, as it turns out, was my first client in 1976 and, although she may not be the largest income earner for my company, is my best client.
In July 1997, she noticed a lump on her breast. She was going to a general practitioner the next day for the flu and the GP checked it out and referred her to a specialist. The specialist did some tests and thought everything looked OK. There was no family history and all her grandparents had lived into their late 80s and early 90s. On the following Monday, she was told that the needle biopsy test showed malignancy and the following day a mammogram confirmed this.
A week later on July 14, 1997, my client, aged 38, had a mastectomy operation and started chemotherapy a few weeks later. Every three weeks she was given some chemicals designed to wipe out any cancer cells that surgery had not removed.
Early in this treatment, she contracted a particularly nasty flu that caused her temperature to get to a dangerous level and which required hospitalization and intravenous antibiotics to get things under control. The chemicals had destroyed body’s white cells so there was no natural protection.
On August 4, 1997, I picked up a check for my client from AXA for a trauma recovery/critical care claim. This check paid off my client’s mortgage and business loans, provided the funds to pay a nanny for a year and a half to look after her kids and provided a few dollars for some improvements to her house and for her to take her kids all the way from New Zealand to Disneyland. Do I think critical illness coverage and DI coverage made a difference in these people’s lives? Of course it did.
Has the sickness affected just my client? No. The whole family was affected. My client’s husband is a self-employed businessman who took many days off to be with his wife. A visit to a specialist for tests effectively takes a whole day and there were plenty of these. Ten chemotherapy treatments required her husband’s attendance at her side.
Was it better for him to be by her side because they were well looked after instead of being at his office?
Kathryn is in excellent health and her hair has grown back. But she still has some side effects from another drug she will be on for about five years. She has lots of friends and knows she will get even better and stronger than she was before.
How do I know so much about this client? I know because she is my darling wife Kathryn.
I hope this presentation has awakened your professional interest in the magic of life insurance. I’ve seen life insurance in action. I’ve seen the checks and I’ve seen the families they have touched.
Chris MacKay, CLU, CFP, of Hutt City, New Zealand, has been in the industry since 1976 and is a 22-year MDRT member. He has led or been a runner-up in sales for his primary company AXA New Zealand on many occasions and is the first New Zealander to hold the CLU and CFP designations.
This is an excerpt from the transcript of the seminar "Critical Illness Sales Ideas from Around the World" given at the Million Dollar Round Table 2001 Annual Meeting in Toronto, Canada. For the complete copy of the presentation, contact MDRT at 847-692- 6378 or visit its website at www.mdrt.org.