| First of all - the quality of your protection policies. | | | | number of conditions covered and their wording, |
| Protection - the policy conditions minefield | | | | there can be a huge difference between |
| Let's use an example. Dr Cureall, a family man | | | | companies. |
| with a large mortgage, has decided it is high time | | | | Let's look at a couple of examples: |
| he sorted out his protection requirements. | | | | Heart attacks account for a large percentage of |
| He wants to know what types of protection | | | | claims. Many companies will insist on there being |
| there are, and approaches us to ask for advice. | | | | 'typical chest pain' present for them to pay out |
| We explain there are 3 types of cover:oLife | | | | amongst other criteria. However, a small |
| protection, paying out a lump sum or income over | | | | proportion of companies do not stipulate this and |
| a certain period of time if you dieoCritical Illness | | | | may be more attractive. |
| protection, a lump sum paid if you have a | | | | Total Permanent Disability is seen as a 'cover all' if |
| specified illness or are totally | | | | the condition does not fit a specific illness listed in |
| incapacitatedoPermanent Health Insurance, an | | | | the policy conditions. So if Dr Cureall cannot work |
| income paid to your normal retirement age (or | | | | then we could assume he'd be covered. Maybe, |
| while you are ill) if you cannot work for health | | | | but not always. Many companies specify in their |
| reasons | | | | occupation definitions that the claimant must |
| Dr Cureall decides he would like to cover all | | | | return to work if they are 'suited' to another job |
| eventualities (next newsletter explains why this is | | | | or even worse can perform 'any' type of job. |
| a good idea). The cover linked to the mortgage | | | | Not very reassuring if you find you have this |
| will be a reducing benefit (he has a repayment | | | | type of plan as a doctor or dentist. Where |
| mortgage), whilst the family income benefit will be | | | | possible, you should make sure the plan has an |
| indexed to take into account of inflation. The aim | | | | 'own' occupation definition (which may not |
| here is to pay off the mortgage and leave | | | | normally costyou any more money). |
| enough for his wife and children to continue their | | | | Permanent Health Insurance |
| lives without any financial worries. | | | | This is a crucial part of protection. Whilst |
| So let's look at each type of protection: | | | | thousands of pounds have been paid in claims |
| Life Cover | | | | over the years, you really do need to be aware |
| This is the easiest type of cover to understand. It | | | | of the pitfalls:o Own occupation not specifiedo The |
| pays out a lump sum on death and normally the | | | | classification of occupation increases premiums to |
| policy to buy is the cheapest one the Cureall`s can | | | | far higher levelso Exclusions such as mental |
| find. They may want guaranteed premiums, which | | | | illnesso No "waiver of premium" meaning you still |
| means that the insurance company will not | | | | pay your premium on receipt of benefito |
| increase their future premiums if they are paying | | | | Premiums are not guaranteed, meaning they are |
| out a lot of claims and need to increase their | | | | vulnerable to increaseso A poor choice of |
| premium to compansate for this. The alternative | | | | deferment periods (when the income starts to |
| is reviewable premiums. | | | | pay out)o No option of indexed protection to |
| Secondly, and crucially, the policies must be | | | | protect from the effects of inflation |
| written under trust for the beneficiaries. This | | | | It is interesting to note that out of the top 14 |
| means any monies will not form part of Mrs | | | | companies that would be price competitive for |
| Cureall`s estate, and therefore not compound any | | | | the type of cover discussed, we would typically |
| inheritance tax issue, but still ensuring the Cureall`s | | | | only use 2 because of the quality issues! |
| will receive their money (potentially saving | | | | The Financial Tips Bottom Line |
| thousands of pounds of Inheritance Tax). | | | | It's likely you have bought one or more protection |
| In our experience, the majority of life assurance | | | | policies. |
| policies are not written under trust. | | | | We're often surprised at how many doctors and |
| Critical Illness | | | | dentists have policies with small print NOT working |
| This type of protection has become more popular | | | | in their favour. We urge you to check your policy |
| in the last few years, particularly with a view to | | | | documents and make sure you're not paying for |
| paying off debt. It is often taken out in | | | | something that may not pay out anyway. Over |
| conjunction with income protection (PHI). | | | | the life of a policy we're usually talking about |
| Since this form of protection is dependant on the | | | | thousands of pounds, sodon't put it off! |