Protecting yourself and your family against the financial consequences of ill health, accidents or even death should be the first step you take in financial planning.
Callaway Sykes Associates Limited can review (free of charge) your current situation including any cover already in place and make recommendations as to the most suitable and cost-effective type of cover available. Where applicable we can ensure that any plans are written in the most tax-efficient manner by using the appropriate trust documentation.
Before cover can start you will need to complete an application form, be medically underwritten and offered terms by the insurance company. Cover will only remain in force whilst you maintain the premium payments. Generally (but not always) there is no investment element and the plans will cease without value at the end of the plan term if a claim has not been made.
There are many types of life assurance and protection cover to include:
Level Term Assurance
This type of cover can be taken out on a single or joint life basis and pays out the agreed sum assured as a lump sum on death within the pre-determined plan term.
Reducing Term Assurance
This type of cover can also be taken out on a single or joint life basis and pays out the sum assured as a lump sum on death. The sum assured decreases throughout the policy term and this type of cover is traditionally used to cover a repayment loan such as a mortgage where the outstanding loan also decreases over the loan term.
Family Security Benefit
This is another type of reducing term assurance designed to provide a regular income stream to your financial dependants following your death. The plan can be written on a single or joint life basis.
Whole of Life Assurance
This type of cover can be taken out on a single or joint life basis and pays out the agreed sum assured as a lump sum on death. The plans have no term and are often used to assist with Inheritance Tax mitigation.
Critical Illness
Whilst many people insure themselves against death they fail to realise that surviving a major health problem but losing their ability to return to work can be financially devastating and critical illness plans help to address this situation.
These types of plan can either be on a level or reducing sum assured basis and pay out the agreed sum assured as a lump sum upon diagnosis of one of the insured critical illnesses. Often critical illness is included within a life assurance contract but can be written as a stand alone contract.
Permanent Health Insurance (PHI)
Income Replacement Insurance provides an income should you be prevented from working due to long-term sickness or injury. It is commonly known as permanent health insurance or sometimes PHI schemes.
These plans work by paying you a tax-free income, usually equivalent to between half and two thirds of your usual salary, if you are unable to work for a long period. The income is generally paid until the termination date of the policy, which can be before your retirement age, depending on the policy's terms and conditions.
If you are self-employed then the benefits under the plan are calculated based on the amount of your taxable income, normally 12 months before you became unable to work.
The income from a PHI plan or scheme is tax-free but you do need to be aware that any income you receive may have an impact on any State Incapacity Benefit that you wish to claim.
Private Medical Insurance (PMI)
Private Medical Insurance cover provides you with the option of private medical care in addition to the care provided by the National Health Service.
You (or your employer) pay monthly or annual premiums, the cost of which is determined by your personal circumstances (e.g. sex, age, previous medical history) and the type of cover you choose. Premiums are reviewed each year.
NB Private medical care does not offer the same range of treatments that the NHS does. It does not provide emergency treatment, or care for a long term condition. Its aim is to provide care for straightforward, treatable conditions.
Taking professional advice is vital with so many types of cover to choose from and the various tax treatments of the benefits provided. Callaway Sykes Associates Limited can provide this expert advice.
Please contact us on 01245 265 881 to discuss these matters further and to arrange a full business planning strategy review.
