Q&A - Answers to basic questions No. 14 to 17
14. What are some important factors to consider when dealing with disability insurance?
Cost is always important, of course, but there are many other aspects as well to consider when one buys disability insurance. The most basic factors are:
15. Are critical illness insurance and disability insurance substituting each other?
Many people believe that if they have either disability or critical illness insurance, they do not need the other one. While there is a grain of truth in this opinion, it's still dangerously false belief. The two kinds of protection complement, rather than substitute for each other. One can compare the two on several dimensions, such as
and while on some dimensions disability insurance will be better, on other ones critical illness coverage offers more. In other words, one can easily describe various realistic scenarios in which one or the other of these insurance types does not help much, if at all, while the other solves the financial problem resulting from sickness or injury. There are cases, of course, when both policies are triggered. (for more detailed comparison, click here)
16. What is the extra charge smokers pay for insurance? What can they do about it?
Smokers have incredibly worse chances for health and longevity than nonsmokers. For example, a 40 year old man can reasonably expect to live until age 80 if he is a nonsmoker, but his life expectancy is only 75 if he is a smoker. Accordingly, smokers have to pay substantially higher premiums for insurance protection. While a 40 year old nonsmoker male can buy a $500,000 ten year term life insurance policy for less than $50 per month, he has to pay more than $100 for the same policy if he is a smoker. The difference varies somewhat, according to age, gender, and type of protection. The extra charge is larger with disability and critical illness policies than with life insurance.
Not all companies define smokers in the same way. For some, cigar or pipe doesn't count, and users of these tobacco products can buy nonsmoker protection with lower premiums. If someone has decided that he/she would quit smoking, buying certain insurance policies can be a good financial incentive to keep and implement that intention. It is so because some companies offer nonsmoker rates even for smokers, but only for a limited period, usually 3-4 years. If the person will really quit in that period, the premium will stay at the lower level, but will be increased otherwise. Even without this special incentive, if someone with an existing smoker policy can declare that he/she has given up the habit (meaning usually no usage at all in the last 12 months), the company may be willing to switch to lower, nonsmoker rates.
Making false declarations regarding smoking habits or history might be tempting, but it isn't worth it. Insurance companies have no tolerance in this regard, and modern science, together with the companies' investigative ability and willingness, give them good chance to discover fraud. Fraud means denial of benefit, even if all the premium was paid for a long time.
17. What demographic, social and economic factors play important roles in the need for, innovations in, and availability of insurance?
Our need for insurance, and the choice from which we can select policies to cover those needs, are largely determined by the state of and changes in economy, society, population demographics, politics, technology, and medicine. Some trends are quite clear:
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Life and health insurance (including disability, critical illness, and long-term care protection)
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