Family
Life and Health Protection - Single Person with Children or dependants |
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 Family
Life and Health Protection - Single Person with Children or dependantsLIFE COVER INTRODUCTION General The purpose of this guidance is to provide information regarding the protection requirements of a single person with children or dependants: Life cover You should consider the provision of enough life assurance to cover any liabilities you may have on your death including funeral and other costs. Disability Arrangements to protect your income if you were disabled through illness or accident and could no longer work. Critical illness Provision of a lump sum benefit if you were to contract one of the major critical illnesses or you became totally and permanently unable to work. Private medical care Insurance to cover the costs of private medical care. Guidance The guidance in this report is restricted to the area of financial protection through life and health insurance. It is not intended to provide you with a tailored comprehensive planning review. We may be able to answer queries by contacting us at enquiries@goforcustomer.co.uk .If you are in any doubt about your requirements then you should seek professional advice. LIFE COVER General need for cover Your death would have serious financial consequences for your children or dependant who is currently dependent on you. It is therefore important to provide adequate life assurance on your life so that your income would be replaced if you died while they continue to be dependent on you. In addition, you need enough to cover your potential liabilities, such as debts, funeral expenses etc. LIFE ASSURANCE COVER There would be various capital items for which a lump sum would be needed if the you died. These include:
Funeral expenses Funeral expenses can vary widely. Emergency funds are worth providing at a person's death. Cash will be needed, but assets are often frozen after someone dies. Specific bequests and liabilities If you have left any specific bequests, they will reduce the amount available to repay any liabilities such as mortgages. It is as well for debts and mortgages to be repaid when a borrower dies; in many cases, lenders insist on repayment and life assurance policies are often assigned to them for this purpose. Potential IHT liability If the value of your potential estate is in excess of £285000 for 2006/07 inheritance tax would be payable at the current rate of 40% of the excess. It is suggested that you should take out enough life assurance written in trust to cover this potential liability; otherwise the family assets may have to be sold to pay the tax. Level
Term Assurance These various capital requirements can be covered by lump sum life assurance policies. Typically, a Level Term Assurance. You should also consider the effects of inflation and whether indexing the life assurance is appropriate. Pension term assurance Most individual should consider Pension Term Assurance for their Life Assurance requirements. You receive basic rate tax relief on the Gross premium payable and if you are a higher rate tax payer further relief on submission of your self assessment forms to the Inland Revenue. At present this valuable facility is available for Term Assurance and Mortgage Protection (Decreasing Term Assurance) only. Full quotation facilities are available and further guidance should be fully understood at NEW LIFE INSURANCE WITH TAX RELIEF. Life assurance - Affordability The premium should be readily affordable now and in the future, based on your own analysis of your income and expenditure. Commitment to maintain protection contract It is important to remember that you will be making a long term commitment to maintaining the cover under this plan. There is no contractual obligation to continue payment of premiums but if you do cease the Life assurance will cease in a short period of days. Income needs Income would be needed to provide for the education and maintenance of the children and/or any continuing dependant requirements. This income would probably not continue to be needed after children have reached their early twenties, although the period of their financial dependence may turn out to be longer, or possibly shorter. For dependants you should judge the requirements. Children's/dependants needs The income required in years would be broadly as follows:
Lump sum life assurance - general guidance Level Term Assurance These various capital requirements can be covered by lump sum life assurance policies. Typically, a level term assurance. You should also consider the effects of inflation and whether indexing the life assurance is appropriate. Continuing Long Term Income requirements (Children/dependants needs) - general guidance The amount of cover needed for long term income is typically provided for with a Family Income Benefit plan. Family Income Benefit A family income benefit policy would provide the most appropriate cover to meet the income needs in these circumstances. Such a policy pays out a regular series of annual payments that would be free of tax over the period when they are needed to cover the additional expenditure. The payments would start from the date of death and would continue until the policy had expired. You should consider index linking the annual payments to reduce the effects of inflation. Quotation Competitive quotations are available by clicking on the "Quote Now" tab under Life Insurance. Both Level Term Assurance and Family Income Benefit can be quoted via the "Quote Now" tab. The quotation provides full terms and conditions from the insurance companies along with the key features document showing the provider's charges and any commissions payable. Read quotation and key features carefully You should read the quotation and key features carefully; they contain important information about your rights and benefits under the policy. Affordability The premium should be readily affordable now and in the future, based on your own analysis of your income and expenditure. Commitment to maintain protection contract It is important to remember that you will be making a long term commitment to maintaining the cover under this plan. If you cease making payments, whilst there is no contractual commitment to continue paying the life assurance would cease. Write in trust The life assurance policy taken out for the benefit of your children/dependant should be written in trust, so that the proceeds of the plan are not paid into your estate, which may be subject to inheritance tax. Furthermore, provided additional trustees are appointed, the proceeds can be paid to the trustees without having to wait for a grant of probate. These trustees can administer the payment of capital and income to the children/dependants for their financial security. Trustees should therefore be trusted close relatives, friends or professional such as a solicitor. INCOME
PROTECTION Need for PHI You would probably suffer serious financial hardship if you were disabled and could no longer carry on working. The bills would still have to be paid, but you would not have enough income. In particular, children/dependants would continue to be financially dependent on you. Insurance companies set the maximum amount of Income Protection benefit allowed on their policies. For an employed person this is normally a percentage of salary and can include bonuses and employer sponsored benefits such as Private Medical Insurance and the value of other perks. The combination of your P60 and P11D issued by your employer has the information about your taxable income on which the benefit is based. If you are self-employed the earnings are your share of pre-tax profits from your trade, profession or vocation after deduction of trading expenses in the 12 months before your ability to work became affected by illness or injury. State benefits The state benefits paid to a person who cannot work because of sickness or disability are unlikely to be enough to meet your needs. Incapacity Benefit is taxable and it is based on a number of strict objective tests which are applied in deciding whether it can be claimed. Extra benefits, such as Income Support, are only paid if the claimant's income is very low indeed and many benefits are paid more or less at the discretion of the Department for Work and Pensions. RECOMMENDATIONS - INCOME PROTECTION (PHI) You should consider taking out an income protection plan (permanent health insurance policy) for protection against the possibility of disability. Level of cover The level of cover you need is denoted on the quotation via the GoForCustomer on-line facility, which should be based on your total employment remuneration. This is the maximum the insurance company will offer. Deferment Period The deferment period (the period of time after the start of your illness or injury which limits your ability to work) can be set as a period of weeks on the quotation. Your choice should allow for any earnings you expect to continue after you stop working, such as sick pay, or how long you are prepared to live on your savings. Increasing cover The plan would provide some protection against the effects of inflation. If selected, once the benefit starts to be paid, it would rise by a percentage or recognised index such as the annual increase in the retail price index. Furthermore, the level of cover would be increased by the insurance company by the corresponding amount; the premiums would increase each year to cover the cost of this growing level of cover. The increase can be decided on the quotation request. Tax position If a person claims under the plan because of disablement, the benefits would not be taxed. Quotation The quotation facility provides a quotation with the full terms and conditions from the various insurance companies along with the key features and key facts documents showing the provider's charges and the commission's payable. Read quotation and key features carefully You should read the quotation and key features and key facts carefully; they contain important information about your rights and benefits under the policy. Affordability The premium should be readily affordable now and in the future, based on your own analysis of your income and expenditure. Commitment to maintain protection contract It is important to remember that you will be making a long term commitment to maintaining the Permanent Health Insurance cover under this plan. If you cease paying premiums, after a short period of days the cover will lapse. To re-establish cover will require the full quotation and application process to be completed and be subject to the then current terms and conditions. If health has deteriorated for example, cover may no longer be available or special terms may be imposed. Permanent Health Insurance (PHI) - choice of company GoForCustomer has conducted research using tools such as Standard and Poors, a financial security rating agency to ensure the suitability of each provider on the quotations menu. The quotations show the providers in order of premium. The choice of Guaranteed or Reviewable Premiums The quotation will allow you to choose guaranteed or reviewable or both types of premium when inputting your details. If you choose both, an assessment can be made when you get the comparison table of quotations from the various Income Protection companies Income Protection - Guaranteed premiums The premiums are guaranteed to remain at the same level throughout the term of the policy. If you increase the cover in the future, the cost of the additional insurance is likely to be higher. Income Protection - Reviewable premiums The insurer can review the premiums at regular terms as shown in the individual key features and facts documents. If the company has more claims than expected, they might increase premium rates, but if the claims experience improves, premiums might be reduced. The advantage of these policies is that the premium rate is generally lower than for policies where the rate is guaranteed. The drawback is that it can rise. Income Protection - with no investment content There is no investment or savings element in the policies quoted, because it only pays out on disability during the period the plan is in force. Income Protection - Exclusions Exclusions are important and are detailed in the Key features and Key Facts documents with each individual quotation. Income Protection - Own occupation The policy should provide cover against the insured person being unable to carry on his/her own occupation. This is preferable to policies that do not generally pay out if the insured person can carry on any occupation whatsoever. CRITICAL
ILLNESS COVER (CIC) Need for cover A serious illness normally means that sufferers have to make radical changes to their lifestyle. Most critical illnesses do not necessarily result in immediate death. A very high proportion of the people who suffer from such illnesses as heart attack, cancer or a stroke survive them for many years. Benefits of lump sum A capital sum would make all the difference to the quality of life under these circumstances. The money could be used for a variety of purposes such as repaying the mortgage or other debts, paying for a special holiday, extra medical care or perhaps necessary physical changes to the home; or it could simply be used to reduce the general financial pressures. Income The lump sum could be used to boost your long term income if you suffered a defined serious illness. This could top up existing income protection if you felt the maximum benefit was insufficient from a Permanent Health Insurance policy. Pension substitute If you suffered a serious illness, you would only be able to contribute to your pension for a limited period. Part of the lump sum benefit from a critical illness policy could be invested to augment your retirement provision and replace the lost pension benefits. Main needs The main needs could be as follows:
Kind of cover Cover, often referred to as critical illness insurance, is used to provide a lump sum to a person diagnosed as having suffered any of the critical illnesses as defined under the plan, or on permanent total disablement. Critical Illness Cover with life cover Many providers have an option that the policy will pay the sum assured on death or critical illness whichever occurs first. The options are available with the quotation. Illnesses covered The illnesses covered normally include heart attack, stroke, kidney failure, almost all serious forms of cancer, multiple sclerosis, or a coronary artery bypass surgical operation or transplant of a major organ. Providers detail the extent of critical illnesses covered and any further extended options they may provide. Income protection not enough Income protection by itself is not necessarily enough; a capital sum could provide instant and often urgently needed benefits. In any case, even the maximum levels of income protection cover are limited to a proportion of earnings. Also, you might be well enough to return to work in the opinions of your doctor, the insurance company providing your income protection and the Department for Work and Pensions. Not a substitute for Permanent Health Insurance Critical illness cover should not be regarded as a substitute for the protection provided by an income protection (permanent health insurance) plan. Unlike critical illness insurance, income protection provides cover against the full range of disabilities, whatever their cause (subject to exclusions). GUIDANCE - CRITICAL ILLNESS COVER Quotation The on-line quotation will provide the full terms and conditions from all the insurance companies along with the key features document showing the provider's charges and the commission payable. Read quotation, key features and key facts documents carefully You should read the quotation, key features and key facts documents carefully; they contain important information about your rights and benefits under the policy. Affordability The premium should be readily affordable now and in the future, based on your own analysis of your income and expenditure. Critical Illness Cover - choice of company Goforcustomer has conducted research using tools such as Standard and Poors , a Financial Security rating agency to ensure the suitability of each provider on the quotation menu. The quotations show the providers in order of premium. Guaranteed premiums If the premiums are guaranteed they will remain at the same level throughout the term of the policy. If you increase the cover in the future, the cost of the additional insurance is likely to be higher. Reviewable premiums The insurer can review the premiums at intervals shown on the key features and key facts documents. If the company has more claims than expected, they might increase premium rates, but if the claims experience improves, premiums might be reduced. The advantage of these policies is that the premium rate is generally lower than for policies where the rate is guaranteed. The drawback is that it can rise. MEDICAL INSURANCE COVER GUIDANCE - MEDICAL INSURANCE FOR INDIVIDUAL General need for cover
More details and an in-depth analysis of the reasons Private Medical Insurance might be more important than you think is available via Private Medical Insurance "Find Out More". Read quotation and key facts carefully Our quotation facility provides various options available to you and is returned via e-mail. Not only will we quote the most competitive but also the best options taking into account features and conditions covered and price. You should read the quotations and key facts carefully; they contain important information about your rights and benefits under the policy. Affordability The premium should be readily affordable now and in the future, based on your analysis of your income and expenditure. ASSUMPTIONS
ABOUT TAX POSITION Tax position The assumptions about the tax position of the plans and guidance made in this overview are based on current law and HMRC which may be subject to alteration in the future. In particular, what assets, gains or income are taxed and the levels of taxation on them are all subject to change. Tax reliefs may also change and their value to you will depend on your individual circumstances. SUMMARY OF GUIDANCE It is advisable to consider: Life assurance You should consider taking out life assurance. If you were to die, there would be serious financial consequences for the family. Income Protection insurance You should have income protection to replace your income in the event of illness. Critical Insurance Cover You should consider having critical illness insurance to provide a lump sum in the event of their suffering one of the specified serious illnesses. Family Medical Insurance Medical insurance should be arranged for the family. |