Critical Illness Insurance Living Benefits Center

Miscellaneous Information

MARKET POTENTIAL IN THE U.S.

The U.S. market is very similar to the U.K. market, but five times larger! After seven years, Critical Illness insurance now has a 1.5% market penetration in the U.K. (Disability Income only has a 6% market share after 50+ years of introduction).

230,000 Critical Illness policies were sold in the U.K. in 1993, a 30%+ increase over 1992. The average face amount of a policy is $67,344 for a total face amount written of $15,500,000.

The United States is five times larger than the U.K.; therefore, the market potential here is $77,500,000,000 of Critical Illness coverage annually.

If the U.S. mirrors the other markets, Critical Illness insurance will become the dominant type of coverage!

The U.K. market has successfully grown, even with the negative sales impact of the National Health Service

PROPOSED POLICY BENEFITS

We recommend a range of product benefits that would be easy to understand by the customer. 100% coverage provided for:

Death from any cause
Stroke
Life-threatening cancer
Kidney failure
Major organ tansplant
Multiple Sclerosis
Alzheimer's Disease
A 25% benefit payable for coronary artery by-pass surgery
A 10% benefit payable for coronary artery angioplasty
A disability benefit payable to essentially "mop up" the rest of the diseases.
The disability benefit would be payable over a four-year period, and have a short-term "own-occupation" feature for the first year.

KEY POLICY DEFINITIONS

I. Heart Attack: "Death of a portion of the heart muscle (myocardium) resulting from a blockage of one or more coronary arteries."

II. Stroke: "Any acute cerebral vascular accident producing neurological impairment and resulting in paralysis or other measurable objective neurological deficit persisting for at least thirty (30) days. "This definition of stroke shall specifically exclude transient ischemic attacks and attacks of vertebro-basilar ischemia."

III. Life-Threatening Cancer: "Those types of cancer shown by the presence of a malignancy identified by the uncontrolled growth and spread of malignant cells and the invasion of tissue. "Leukemia and Hodgkin's Didease (except stage 1 Hodgkin's disease) shall be considered life-threatening cancer.

"Life-threatening cancer does not include pre-malignant tumors or polyps, cancer in-situ, intraductile non-invasive carcinoma of the breasts, carcinoma of the appendix, stage 1 transitional cell carcinoma of the urinary bladder, or skin cancers other than melanomas and stage 1 Hodgkin's Disease."

PROPOSED POLICY TYPES

This type of product is totally flexible in product design. PERMANENT LIFE POLICY:

This type of policy can be developed with any permanent type of "chassis" (i.e., par/non-par whole life, interest-sensitive whole life, universal life, variable life, etc.). We recommend a simple base whole life/universal life policy with a critical illness rider

Policy structured with as low a level premium as possible

A universal life product premium can be structured in many ways:

Minimum premium to create a low cash value term-type policy

High premium to accumulate cash

Medium premium to return all premiums paid after 20 years

A whole life policy could be structured similarly with cash value riders giving it the same flexibility as universal life.

LEVEL PREMIUM TERM INSURANCE:
Premiums remain level for each period (i.e., 10 years)
Return of premium rider

ASSOCIATION/GROUP PRODUCT:
Either increasing or level premiums
Simplified underwriting and issue
Group billing

THE NEED FOR SALES APPLICATIONS

Mortgage/Loan Protection
Family Protection/"Breadwinner"
Single Persons
Housewives and Mothers
Self-employed
Supplemental Disability Coverage
Special Occupations
Keyperson insurance
HIV in medical personnel

OTHER MARKETS

High income earners
Buy-Sell/Stock redemption insurance
Pension "waiver of premium/disabiliy protection"
Payroll deduction
Group coverage

SALES IDEAS

Income Disability Insurance
Versus Critical Illness Insurance

One of the commonest questions asked when selling Critical Illness Insurance is: Q."I already have Income Disabiltiy Insurance protection my income against sickness or accident; why do I need Critical Illness Insurance?"

A. Four reasons:

"Control - A claim under Income Disability Insurance is only payable if the claimant is considered, in the opinion of the insurance company, to be medically unfit to return to work. Therefore, the claimant is not in a position to have control over the payment of benefits. He/she will be in control under a Critical Illness policy, as the lump sum is payable for most conditions upon the diagnosis of the critical illness. Thus, it is important to note the payment from a Critical Illness Insurance policy is not dependant upon an individual being able to return to work (exception: occupatioinal disability benefit).

"Choice - Most people who suffer a serious illness, such as heart attack, would want to 'slow down' and take life easier--work less hours, enjoy a few more holidays, etc. Income Disability Insurance does not allow you this luxury; as soon as you are considered fit to return to work, the claim will cease, thus forcing the individual to return to work in order to pay the bills. Not the case with Critical Illness Insuance--as the lump sum has been paid on the diagnosis of the heart attack, the individual has the choice to decide his future plans.

"Lump Sum Or Income? - When faced with the choice of a lump sum or income, most people would choose a lump sum as it provides them with more flexibility: i.e., repaying their mortgage, etc. Income Disability Insurance provides and income. Critical Illness Insurance provides a lump sum.

"Deferred Period/Waiting Period - If a client has an Income Disability Insurance which starts paying the claim after say 13 or 26 weeks, during that waiting period, serious damage may have been done to a client's financial position. This is particularly relevant to self-employed individuals. For most conditions, Critical Illness Insurance pays out a lump sum upon the diagnosis of a critical illness, thus providing funds at the time the individual needs them most.

SAMPLE GROUP TERM LIFE AND CRITICAL ILLNESS RATES

RATES PER $1,000

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