Loss of allowance means hardship for cancer patients
People with long-term illnesses will be worse off under new government proposals, but there are ways of protecting yourself against sudden loss of work. Chiara Cavaglieri investigates
Sunday 19 June 2011
Cancer patients are set to lose benefits worth up to £94 a week under current Government proposals, according to the Macmillan Cancer Support charity. This raises fears that many will be forced back into work too early to cover the loss.
This is likely to put even more pressure on employers who are already struggling to cope with workers falling seriously ill, according to a new report from Aviva UK Health.
Under the Welfare Reform Bill, which was hotly debated at question time in the Commons last week, people suffering from long-term illnesses such as cancer will no longer be eligible for employment and support allowance (formerly incapacity benefit) after one year if they have a partner earning as little as £149 per week.
"In my experience, one year is simply not long enough for many people to recover from cancer," says Professor Jane Maher, chief medical officer of Macmillan Cancer Support. "The serious physical and psychological side effects of cancer can last for many months, even years, after treatment has finished. It is crucial that patients are not forced to return to work before they are ready."
You may not be able to bank on your employer helping out either. In a recent Aviva study, one in five of the employers questioned had experience of staff living with cancer, and although the vast majority said their primary concern would be the health and well-being of their employee, one in 10 worry about finding the money to support them and 11 per cent were concerned about getting the employee back to work.
Without adequate financial support from the state or your employer, you may have to look for other ways to protect yourself. Many people are happy to take out life assurance to ensure their dependants are looked after in the event of their death, but few consider the potential financial strife of a serious illness. Taking prolonged amounts of time off work can be a huge burden for families reliant on one income to pay the household bills and mortgage repayments. Company sick pay will take you only so far and may be fairly restrictive, so it's well worth considering extra protection.
"Many of us believe that our family and friends or the state are there to support us if we're unable to work, but few people have savings available to support them long term. State provision could be as little as £100 per week, which may not even cover a family's weekly shopping bill, let alone a mortgage and other expenses," says Louise Colley, head of protection marketing for Aviva.
For life-threatening conditions such as cancer, Alzheimer's, strokes and heart attacks, critical illness cover will pay out a cash lump sum. You can buy it alongside life cover or as a standalone policy, with premiums determined by age and health. You can opt to keep the level of cover the same throughout the term, or decrease over time, perhaps in line with paying off your mortgage.
The conditions that are included in the cover are always specified in the policy, so watch out for any exclusions and don't assume that if you have bought a critical illness policy it will automatically pay out if you have cancer. One of the major problems with this cover is that many policies exclude early stage cancer. This is defined as being non-invasive, but this term is slightly misleading in that if you have a lumpectomy or mastectomy you may still be unable to claim. Some insurers such as PruProtect pay only a percentage of the sum assured (anything from 10 per cent to the full whack) depending on the severity of your condition, so ensure that you know exactly what you're signing up for and take advice if necessary.
According to broker Lifesearch, £150,000 of critical illness cover for a 30-year-old male non-smoker over a 25-year term costs £52.70 a month from Aviva. A 30-year-old female non- smoker can expect to be covered for £51.35 with the same provider.
Crucially, critical illness cover does not cover for accidents or many of the common conditions that could keep you out of work such as back pain or stress, so many experts say that income protection could be far more suitable.
"Income protection for the vast majority should be top of the list," says Matt Morris from protection broker Lifesearch. "What the state gives you is nothing more than the bare minimum. You're not going to be able to maintain your lifestyle with that kind of payment, but income protection will help you keep living the way you are currently living."
This insurance starts from an entirely different premise – instead of getting a payout for a specific condition or illness, it covers you if you are unable to work and provides a monthly income that is designed to replace your salary, rather than a one-off payment. Cover lasts until you have either recovered or retired, although there is a deferment period set beforehand which determines how long you must wait for the policy to kick in after falling ill.
You will have to pay more for income protection but you can keep premiums to a minimum by increasing the deferment period. This is the minimum waiting period between falling ill and your policy starting to pay out and the longer this is, the cheaper your premiums will be. It may be prudent, therefore, to arrange for payments to kick in once any employer sick pay or your own savings have been used up first.
Lifesearch says that the best deals for £1,500 a month of income replacement for a 30-year-old male and female non-smoker from provider Aegas comes in at £24.96 and £38.84 respectively.
You will not usually be able to replace your entire salary. Aviva offers to replace up to 60 per cent of the first £25,000 of your gross earnings and 50 per cent of the remainder, up to a maximum £180,000. You also need to read the policy wording carefully to ensure the policy is right for you. Steer clear of those that cover you only if you are unable to do any paid work (called "any occupation" policies) as they are far less likely to pay out.
"Look for a policy with an 'own occupation definition', which means that if you're too unwell to do your own job the policy will pay out. This guarantees payment at the right time," says Mr Morris.
Sara Turle, 51, Primary school senior learning mentor
For Sara Turle, who lives with her husband in east London, paying just £3.40 a month for an Aviva income protection policy which she took out with her mortgage back in 1981 has proved invaluable.
"I thought I was infallible. We used to laugh that I never took a day off sick, but last April, I was in the shower one day and I found a breast lump," says Sara (right).
After giving up work for a lumpectomy at the beginning of May last year, she then found that it had spread into the lymph nodes which led to six months of chemotherapy, followed by five weeks of daily radiotherapy. Sara was able to get back to work at the beginning of the year thanks to her carers at Queen's Hospital in Romford, but when her six months of full pay from work came to an end, the payout from her Aviva policy meant that she didn't have to worry about money.
"The monthly payout of £212 on the policy was very useful in helping to supplement the further two months I was off work on half pay. To go down to half pay is huge, especially when at the time I had two children at university and a mortgage," she says.
"We insure everything in our lives, be it cookers, electrical goods or the boiler, but what people really need to think about is covering themselves for that rainy day that hopefully won't ever come."
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