Womb to tomb under a health umbrella

THE need to insure against future ill-health now extends well beyond the shortcomings of the NHS. The limitations of the new State Incapacity Benefit and the high costs of nursing-home accommodation have concentrated many minds.

"People are increasingly considering a do-it-yourself approach to the welfare state," says Chris Cummings, communications manager at PPP Lifetime. "Even a change in government is far from guaranteed to produce any magical remedies."

A prudent individual, assuming he could afford it, would have at least four kinds of health-related cover: permanent medical insurance for medical treatment; private health insurance for incapacity; long-term care insurance for old age, and critical illness cover to cope with a dread disease.

Such a combination can prove prohibitively expensive. A middle-aged man living in London, for example, can pay more than pounds 50 a month for permanent medical insurance alone.

Some discounts are available for multiple users. PPP Lifetime gives up to 10 per cent off for those who take two or more of the four products. Bupa, which does not offer long-term care cover, has discounts of up to 30 per cent for users of the other three - if accepted at standard rates under critical illness and private health cover.

Only Pegasus Assurance and Lincoln National combine a significant variety of health-related insurances (plus life cover) in a single package. Their umbrellas can prove more convenient and more cost-effective than shopping around for individual components. Both have minimum premiums of pounds 20 a month.

Pegasus's Combined Health Insurance, a whole-of-life protection policy, is essentially an account from which cash can be withdrawn upon the occurrence of a wide range of critical illnesses and disabling conditions.

The policy-holder receives the entire sum assured less any amounts previously paid - for critical illness, long-term care, injury and permanent disability, or death and terminal illness (optional). The policy also covers private health insurance, major medical expense benefit and hospital cash benefit (the latter two when combined being broadly equivalent to a low-cost permanent medical insurance policy). Claims under these reduce the initial sum assured and the premium.

When payments have totalled 50 per cent of the initial sum assured, the balance is automatically paid to the policy-holder. In some cases, particularly for young people, Combined Health Insurance can clearly represent good value.

Jason Georgiou, a 31-year-old partner in Little & Georgiou, an independent financial adviser in Bradford, West Yorkshire, took out a policy in March 1993. He pays pounds 34.52 a month for a sum assured of pounds 95,000. Mr Georgiou, who claimed pounds 5,000 in medical expenses towards the cost of a knee operation in December 1993, realised that a high degree of protection was necessary to protect his young family. He was attracted by the broad cover on offer.

"I have critical illness and life policies with other companies ,but these don't have the bells and whistles," he explains. "Having noticed some of the relatively minor operations Pegasus is willing to cover, it seemed such good value that I thought, to be honest, they'd got the costings wrong.

"While it is virtually impossible to make concrete cost comparisons between products, for most people the package would undoubtedly work out significantly cheaper than buying the components individually."

Lincoln National's Financial Foundations offers a similar basket of benefits. Its premiums are comparatively more expensive, but claiming under one area of cover does not reduce the amount that may subsequently be claimed from others.

Furthermore, unlike the Pegasus deal, clients are able to select only those benefits most important to them and in the quantities they can afford. The importance of this should not be underestimated. Some people, for example, may already be covered in particular areas by a pension scheme. Others with existing stand-alone health insurance policies may be reluctant to switch insurers - to do so may prevent them from insuring against pre- existing conditions.

Some critics of these policies emphasise that you are limited to a range of benefits offered by only one company, and definitions can be unsuitably narrow.

Such policies have nevertheless not always received the attention they deserve. The scarcity of providers can be blamed at least in part. The products are difficult to underwrite, and few companies have sufficiently flexible administration systems.

Distribution presents a further problem. Specialist medical intermediaries tend to have parts of their organisation specialising in different products, and are not geared to the umbrella approach. Other intermediaries tend to find them hard to understand.