Alan Knowles dispels the common misconception that you cannot secure income protection for people with diabetes.
I am a big fan of income protection and I still feel it the most undersold protection policy in the UK market today.
While more advisers are certainly discussing the cover with clients, the income protection market can still be very daunting when it comes to underwriting policies.
Will insurers exclude conditions, will the prices shoot up or will they just decline cover altogether?
In addition, with a large number of providers offering a variety of income protection plans, advisers may be left wondering who to approach.
We receive referrals from a number of brokers on a variety of conditions, but the one that comes up time and time again is income protection for people with diabetes.
Just like critical illness cover for diabetics this is a tight market.
However, many people fail to realise that it can be easier for people to secure income protection if they have diabetes than it is critical illness cover.
Income protection for Type 2 Diabetics
For people with type 2 diabetes there are a number of providers who can consider income protection.
Often the criteria of an acceptance is similar to that of critical illness cover. The ideal client will have:
• Well controlled HbA1c readings (or mmol/mol in new money).
• Have no other associated conditions such as eye, kidney, heart or circulation problems.
• Have had a normal urinalysis test.
• Have well controlled blood pressure and cholesterol.
It is also better if the client is a non-smoker and has a reasonable BMI (Body Mass Index).
Being a type 2 diabetic is seen as less serious by insurance companies as it is less likely to lead to complications in future life. For this reason there are more providers who can consider the cover.
Most providers who can consider cover are likely to place a loading on the premiums.
The loading is often 75%-150% to cover the risk of diabetic complications. There are however certain providers who will simply exclude diabetes (and conditions arising from diabetes) from the plan.
The latter might not be ideal, but is it better than having no cover especially when a loading makes cover unaffordable?
Where clients are offered a higher price there are some companies who can help offset it by offering lower claim periods, e.g. 1, 2, 3 or 5 years.
Income protection for Type 1 Diabetics
For type 1 diabetes the market is very small for income protection but there are circumstances where cover can be offered.
Again clients will need to have their diabetes very well controlled much like with type 2 diabetes.
Some providers will only consider clients who are diagnosed later in life, which admittedly is rare for type 1 diabetics.
As with type 2 diabetes there are some providers who can offer cover with a premium loading and some with an exclusion.
However, secondary conditions associated with diabetes such as proliferative retinopathy, neuropathy or cardiovascular disease are all likely to prevent income protection being offered.
It is important to understand that while income protection can be available for people with diabetes it is usually only available for those with very good control of their condition.
Of course you may find that clients' occupations will factor into the equation. Paying a 150% loading on a class 3 occupation may work out a little too pricey for most.
You may also find that certain class 3 and 4 occupations are only covered by companies who will not cover people with diabetes.
The good news is that there are alternatives that can be considered.
One potential option is company sponsored plans like group income protection. Some plans can offer a level of cover without taking medical history into account.
Of course this might work for company directors or employees in smaller private firms but certainly will not help for clients working in the public sector.
Another option is general insurance by the way of accident and sickness cover.
Much like an Over-50s plan it offers cover without asking many (sometimes any) medical questions.
Of course this will most likely exclude pre-existing conditions and will not be as comprehensive as a true income protection plan.
On the other hand the chances are it will be available at a fraction of the cost of a fully underwritten plan.
It is worth bearing in mind that most of these plans only cover 12-24 months in the event of a claim, but again is it better than having no cover?
I hope that as more advisers embrace income protection and client's awareness of the product continues to grow, that the market will see more developments on underwriting of this condition.
After all there are over 4 million people living with this condition in the UK and many will have a need for protecting their income.
Alan Knowles is managing director of Cura Financial Services and the Special Risks Bureau