For some people life insurance forms an important part of their financial planning. Considering what position you would leave your dependents, should you depart prematurely, can be quite daunting. Life insurance for many can provide some form of comfort, knowing that, for example, the mortgage is paid off or a lump sum is available for the short term to assist with the interruption to your lives. These concerns are no different with PSC sufferers and so many have asked in the past about obtaining life insurance. For starters, an explanation of insurers' views on PSC:
Cover for those with PSC
Life insurance is simply a gambling game by an insurance company. They are gambling on how likely you are to die within a set period of time (the term). It's the same the world around. Of course the more perilous our job, the more ill we are or the more dangerous the sports we play, the more likely we are to die in any given period. We have spoken to most of the main life insurance providers and they provide a straight decline on new applications for those with PSC. This is mostly because PSC is a rarer condition than the other thousands of conditions they also have to consider and judge risk for. Due to their lack of knowledge of the condition this would pose a much increased risk to them as they cannot accurately assess life expectancy which, after all, is what life insurance is based upon. There are however specialist insurers who will deal with 'declined' cases (those which cannot be put in place with the main providers). We have seen new policies put in place for those with PSC , though the cost was significantly higher than for someone without the condition. Many PSC suffers also suffer from Ulcerative Colitis and we have seen policies put in place with both these conditions in place. If you have had a liver transplant you may still be able to obtain cover. The more stable your blood levels and more recovered you are the lower the premiums are likely to be. Of course, due to the nature of PSC being different for everyone it is necessary for the insurers to properly check each individual case.
What Might You Expect
You can expect there to be a few more hoops to jump through in order for you to get insurance. The cover may also be a little limited. When applying, the insurers will want to write to your doctor and possibly directly to your specialist to get an understanding of your current condition. They may well also ask you to attend a medical. The medical will usually consist of a urine and blood check together with height/weight checks etc. This is a normal procedure for anyone applying for a large amount of cover or specialist cover. The cover they offer will be significantly more expensive. Therefore you may wish to consider reducing the amount of cover you take out if your budget cannot stretch. While a lot of people will want to have cover that will last for a specific period (for example it may be 25 years to cover a 25 year mortgage) you are likely to be limited. Typically this will be limited to 3 or 5 years and almost certainly no more than 10. Once this expires you could then apply for cover again but this would require a new application and you would not be guaranteed cover. If you have other conditions then there could also be 'exclusions' on a policy. This would mean that the cover would not pay out in the event of a claim relating to the exclusion.
The good news for you is that in most cases there will likely be no cost to find this out, only the premiums to pay if you wish to take out a policy.
Critical Illness cover
This is a form of insurance which covers 'career threatening' illnesses and most often pays out in the cases of Cancer, Heart Attack, Stroke, Multiple Sclerosis etc. Due to the nature of PSC it is unlikely that a sufferer will be able to obtain Critical Illness insurance. Again, there are insurers who may consider this but due to the higher risk of one of these other conditions being linked to another condition that may cause a pay out, they are unlikely to provide cover and if they did at such a high cost it is likely to be unaffordable.
If you have insurance in place at the moment then the premium and cover is based solely upon underwriting at the time you took it out. Therefore, if you change job, move house, or your health changes then the policy does not usually change at all. If you therefore have life insurance in place, you are not likely to be able to replace it at anywhere near the cost of what you took it out for, assuming you now have PSC. Therefore, if your cover is not correct, you may wish to consider keeping this in place topping it up if possible. In certain circumstances you may even be able to extend your existing cover. Many policies are taken out specifically to pay off a mortgage. These policies often have the ability to increase cover if, for example, you move house and have an increased mortgage or have a baby. This would be particular to the cover taken out but is worth looking in to as these policies are underwritten at the time you took out the policy originally. Therefore, if you have since been diagnosed with PSC, this should not affect the premium you pay or your ability to extend cover.
Many people believe their life insurance is linked to their mortgage. While the level of cover may be initially linked to the mortgage it is worth noting that a life insurance policy is normally completely separate from a mortgage contract. You are therefore able to maintain a mortgage life insurance policy even if you no longer have a mortgage. Do not think you have to cancel this or that your mortgage company can affect this policy, unless of course there are special terms in place on this, which is unlikely.
If there are two of you applying at once that want life cover (for example a mortgage) it is often the case that people apply for a joint policy. In our experience there is likely to be only a small additional cost to having two individual policies rather than one joint. If you are applying to a specialist provider then the other applicant (assuming they are fully healthy) may even get cheaper cover by having a single policy with a mainstream provider. An additional benefit is the that you would then have two lots of life cover in place which would be especially useful in the case of children and individual policies can also be put in to trust more easily.
In order to provide the most flexibility to your beneficiaries (who are ultimately the reason for the life cover) you should consider whether a policy should be placed in trust. There are various forms of trust available for life insurance policies but in most cases a good adviser will recommend a discretionary trust or an individual (bare) trust. You should consider the benefits of this and speak with a good financial planner to establish your requirements and what may be appropriate for you. Life insurance can be placed in to trust retrospectively so even if you already have cover and do not wish to cancel it, you may still be able to place it in trust.
In all instances we would recommend that you take good financial planning advice. They will help you understand the different types of cover available, the appropriateness of them and ensure that any trusts are used as appropriate. There are a few advisers in the PSC community who are able to help with giving advice who have experience with PSC and applying for life insurance. You may find these people are better able to get straight to the providers that can provide you cover and cut out all the research that has already been done. Otherwise you can find an independent adviser at Unbiased.co.uk.
Written by Howard Spargo, Independent Financial Planner – October 2013