A Quick Overview of Life & Health Insurance Cover

Insurance is a mature marketplace, which has evolved over hundreds of years.

The original insurance policies were created to allow the wealthy owners of mercantile ships to protect their assets against the risks posed by the dangerous seas. 

By taking out insurance, an entire class of merchants could in effect share the risks of an entire fleet, rather than staking their fortune on the outcome of a single vessel. 

This simple principle carries through to the insurance we see offered today. Each policy allows consumers to share their risk around, with the objective of ensuring that no individual feels the full weight of the costs of a medical diagnosis.

Let’s walk through the main types of insurance available for health and life:

Term Life Insurance

Life cover is a policy which will payout if you die within the term of the policy. Life cover terms can be as short or as long as you wish – so long as you specify the duration at the outset and continue to make the monthly insurance premium payments. 

Term life insurance will pay into your personal estate by default. This means that proceeds may be subject to inheritance tax and could be used to pay off your existing debts before your surviving dependents receive their money. 

Life insurance can be structured differently to result in direct payments to beneficiaries. This is known as writing the insurance into a trust – this effectively means that the insurance is not associated with your own personal estate, and as it will be paid directly to others, it would not normally fall under inheritance tax. The disadvantage of these types of policies is that it can be difficult to change the beneficiaries at a later date. Tax laws may change therefore always perform your own research and consider finding a financial adviser to assist. 

Private Medical / Health Insurance 

Medical insurance is designed to provide individuals with access to top-class healthcare with minimal outlays at the point of receiving treatment.

The policy will pay for most of the cost of any essential medical treatment and after-care, although policy exceptions do apply. Some policies are more comprehensive than others, and the level of excess on some policies will be higher than others. 

In most countries where healthcare is available freely as a public good, private medical insurance is used to tap into additional hospital capacity and services. The waiting list for procedures is typically much shorter at private hospitals, therefore being able to utilise private healthcare may result in faster and more comfortable treatment. 

In the case of cancer, for example, where treatment is urgent and has a direct impact on survival rates, being able to opt for health treatment could be very beneficial. 

That being said, public hospitals can have better diagnostic equipment and a patient will typically ‘mix and match’ private and public services over the course of long medical episodes, depending on what is most suitable for them.