Life and critical illnesss insurance- why is it important to watch out for lapse supported products?
Short Term Product Performance - A lapse supported product shows improved long term performance only if short term performance is impaired. If you happen to be one of the unfortunate policyholders who find they must lapse early, your surrender value will be very small, if any at all. And, even with a 3% annual lapse assumption, 46% of all policyholders will have lapsed by the end of the 20th year (ignoring mortality, i.e. dying and using the life insurance)
 Policyholder Service - A policyholder who buys a lapse supported product will find himself in a strange position - the company will actually prefer that he lapse. This is not a comfortable thought when future dividends, critical illness insurance policy enhancements and other types of policy service are considered. A lapse supported product creates a Catch-22 situation. If the critical illness insurance company is correct and lapses do materialize at the assumed level, then clients who may have thought they would never lapse, will lapse - at a great cost. If, on the other hand, the clients are right and lapses rarely occur, the company will not be able to afford to live up to the illustration. Unfortunately, the only sure thing with a lapse supported product is that short term surrender values will be very low
In a way, this is similar to gambling.
This is a brief overview of the factors that can affect the performance a critical illness insurance policy. More detailed information will be eared in upcoming specific reports focusing on maintaining and monitoring specific types of policies. This overview is intended to give a general idea of what might affect your critical illness insurance policy. All of the factors previously discussed help determine the premium you pay for critical illness insurance.
In brief, critical illness insurance remains one of the most complex, yet effective forms of insurances on the market. Getting will certainly do more good than harm to your personal life- its need will be clear when you will be awarded benefits while you are critically sick.
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