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Guardian Survey: Men are Twice as Likely as Women to Use Credit Cards to Pay for Major Health Expenses

Young Consumers Expect a Financial Bail-out from Family Members to Pay for

Medical Bills 30% of Consumers Receiving Care for a Critical Illness Have Not Recovered


NEW YORK, Sept. 10 /PRNewswire/ -- Men are more likely than women to use credit cards to pay for major medical recovery expenses and both sexes largely agree that a critical illness would pose a financial hardship, according to a recent survey from The Guardian Life Insurance Company of America (Guardian). The study, Benefits & Behavior -- Spotlight on Group Critical Illness, also revealed a significant generational gap with regard to expectations that family and friends will provide loans to pay for medical debt.

The New Health Hazard -- Credit Card Debt

-- One in five Americans who have had direct experience with a critical illness used a credit card to finance recovery related expenses.

-- Men are twice as likely as women to have done so. 30% of men charged critical illness recovery expenses versus 14% of women.

-- One-third of consumers using a credit card charged more than $5,000.

-- A third of consumers receiving care for critical illness have not yet returned to financial normalcy.

"Far too many consumers are relying on high interest rate credit cards to pay for their medical recovery and indirect costs," said Jim Pogue, senior vice president, Group Benefits, Guardian. "If you only make minimum payments, $5,000 on your card today can quickly escalate into thousands of dollars in interest."

70% of consumers feel that their families would sustain financial hardship or stress if they were to suffer a critical illness, with nearly a third saying it would be a substantial hardship or burden.

"Census data shows that the median U.S. household income is $48,200 and we continue to have a low to negative national savings rate," added Pogue. "At a time when families are living paycheck to paycheck and hold more responsibility for their financial future, including retirement savings, it would not require a large amount of medical expenses to financially disrupt most households."

A New Retirement Threat -- Your Family

The study revealed family and savings are the first places people turn to for a helping hand when they amass debt related to their health.

-- The majority of consumers say they would use savings to fund out-of-pocket expenses not covered by their medical or disability insurance, with 40% saying they would seek assistance from their families. Taking out a second mortgage, using credit cards and seeking assistance from friends are the next most frequently cited sources.

-- The younger the consumer, the more likely they assume they can rely on family assistance or friends to defray out-of-pocket expenses of up to $10,000 not covered by their insurance, while those aged 35-54 are more likely to mention taking out a second mortgage on their homes.

-- The following chart tracks where people would seek funds if they incurred out-of-pocket expenses (of up to $10,000) not covered by medical or disability insurance:

Age 18 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65+

Family 62% 60% 46% 34% 23% 17%

Savings 49% 63% 61% 59% 61% 63%

2nd Mortgage 4% 21% 31% 23% 14% 12%

Credit Cards 18% 27% 21% 16% 13% 9%

Friends 21% 20% 17% 13% 8% 4%

Other Sources 10% 5% 7% 8% 5% 2%

"It is admirable and often necessary to help family and friends," said Barry Petruzzi, second vice president, Group Benefits, Guardian. "But if you give more than you can afford, these types of emotional loans can derail your retirement or liquidate emergency savings that you may need for your own financial plan. Critical illness insurance can be an important part of any family's financial protection."

Let's Take a Pop Quiz

Which of the following products gives you a lump sum of cash upon diagnosis of a major illness such as a heart attack, stroke or cancer?

A) Critical illness insurance

B) Medical insurance

C) Disability insurance

D) Long-term care insurance

E) Accelerated death benefit on a permanent life insurance policy

If your answer is B (medical insurance), then you are similar to half of U.S. consumers who believe that medical insurance gives them a lump sum of cash if they are diagnosed with a critical illness.

Guardian's survey revealed that many Americans do not understand key differences between critical illness and other health related insurance products such as medical, long-term care and disability coverage.

-- More than half of consumers claim to know the differences between disability, long-term care or medical insurance versus critical illness insurance, while less than 40% say they know what distinguishes accelerated death benefits on permanent life insurance from critical illness insurance.

-- A third of consumers believe that disability insurance, or accelerated death benefits on permanent life insurance would provide lump sum cash payments if the insured were diagnosed with a critical illness, and a quarter think that long-term care insurance would do so.

-- Traditionally, medical plans pay for treatments outlined in a plan contract. Traditional medical plans may provide cash to reimburse consumers for out-of-pocket expenses related to this care, but they do not give consumers a lump sum of cash simply because they have been diagnosed with an illness. Generally, only a critical illness policy provides this type of flexibility and protection. If a consumer wants to see a doctor or alternative medicine practitioner who is out of their plan's network they will likely have to pay a portion or all of the bill out of their pockets with a traditional medical plan. But a critical illness policy can provide the cash and flexibility needed to pay for this supplemental care.

Long-term care insurance and accelerated death benefits may provide a lump sum of cash, but it is not based simply on a diagnosis of a major illness. Consumers generally have to lose the ability to independently manage a few of their activities of daily living (bathing, dressing, eating, getting in and out of bed, toileting, walking) to receive a benefit.

Disability insurance replaces a portion of the income that you lose due to a disability and you usually have to wait more than thirty days before you receive money. With a critical illness policy you can receive money a short time after being diagnosed with a major health issue.

Additionally, new generations of critical illness policies provide coverage for hospital stays without regard to the particular illness. Older generations of critical illness only covered very specific illnesses.

"Critical illness is an affordable way to complement disability, long-term care, high deductible health plans and traditional (HMO, PPO) medical insurance," said Petruzzi. "In today's world where consumers have limited cash reserves and savings, they can create financial leverage with insurance. An insurance protection plan that includes critical illness in combination with these other products can help to bring peace of mind to families when they need it the most."

Guardian specializes in providing employee benefits to small and mid-size companies. Guardian serves more than 120,000 employers, and 6 million employees and their families. The company has issued a series of educational surveys and reports to help employees, employers and benefit decision makers better understand how they can jumpstart their financial lives and improve employee recruitment, retention and satisfaction by maximizing the use and power of their workplace coverage. Five reports currently available in the series include:

-- Benefits & Behavior: Spotlight on Group Critical Illness Insurance

-- Benefits & Behavior: Spotlight on Group Medical

-- Benefits & Behavior: Spotlight on Dental

-- Benefits & Behavior: Spotlight on Group Life and Disability Insurance

-- Benefits & Behavior: The Voice of American Business Owners and Benefit

Decision Makers Today

The reports can be found at

About the Survey

The Opinion Research Corporation of Princeton, New Jersey, conducted this omnibus consumer survey for Guardian. The survey sample consists of 1,000 individuals who are at least 18 years of age. They were interviewed by telephone from April 17 to 20, 2008. The margin of error was plus or minus 3.1 percentage points at the 95% confidence level.

About Guardian

Founded in 1860, The Guardian Life Insurance Company of America, New York, NY (Guardian) is one of the largest mutual life insurance companies in the United States. As of December 31, 2007, Guardian and its subsidiaries had $41.3 billion in assets (on a consolidated statutory basis). With close to 3,000 financial representatives and 80 agencies nationwide, Guardian and its subsidiaries protect individuals, small business owners, and their employees with life, disability, health, long-term care, critical illness and dental insurance products, and offer 401(k), annuities, and other financial products and trust services. Specializing in the small to mid-size business market, Guardian's Group business unit serves more than 120,000 employers, 6 million employees, and their families. More information about Guardian can be obtained at:

SOURCE The Guardian Life Insurance Company of America
Copyright©2008 PR Newswire.
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