Does your family have the protection it needs…….without you?

Summer is time for family, holidays and fun….hopefully with a bit of summer weather thrown in! Many will spend time with their loved ones, caring for their required needs.

But when is the last time you looked at your family protection to really make sure they are protected…and not just on holiday.

Some clients find this a difficult subject to address because the need is only likely to arise in the event of death or Ill health, neither of which are pleasant subjects, especially when they refer to you. However, I understand that there are two things certain in life, namely death and taxes and sadly you can only normally insure against the former. What should you, your spouse/ partner and your family consider?

1. Start with any employer benefits

When did you last read your employment contract and the benefits your employer offers?

Many employers offer varying benefits, however, benefits might include, as examples:

» Death in Service Benefits, say 2/3/4 X salary in the event of your death whilst employed.

» Medical Insurance, to cover hospital/surgery costs if needed. If you have this cover, are your family included? If not, you may be able to add this protection (at an additional cost). The type of benefit is normally treated as a benefit in kind for income tax purposes.

» How long will you be paid if you were unable to work due to ill health? Some employers offer protection of salary for a period of time, but it is worthwhile finding out how much this is. Some will only offer Statutory Sick Pay (SSP), which is currently £81.60 per week (2011/2012).

Taking all of the above into account, you can then start to plan to protect the gaps in your financial protection planning……if there are any.

This cover may be lost when you leave an employment, and you may want to consider this when looking at an alternative employment/ self-employment option.

2. Existing protection policy cover

You may also have some existing protection cover in place and this may compliment well the benefit provided from your employment, so make sure you keep the details of these plans safe and keep any policy documents safe.

Some older type plans have policy conditions that are now considered generous. If you are thinking of replacing these covers, then check the benefits covered carefully to make sure you are replicating the cover you require.

If you have a financial adviser, make sure they have a list of what covers you have to keep records correct.

3. Examples of types of protection cover

Income Protection (Permanent Health Insurance/PHI)

» Replaces part or your income if you are unable to work for a long period of time due to illness or disability, and will continue to pay out until you can return to some kind of paid work or reach retirement, whichever is sooner.

» Usually, you pay a monthly premium throughout the term of the policy and costs depends mainly on: your age, your sex, your health, your job, hobbies and lifestyle as well as waiting period, which you can choose i.e: 4 weeks up to 104 weeks.

Life Insurance

» Provides a lump sum or fixed regular income, either if you die (if whole of life policy) or if you die within a specified term (term insurance).

» Term insurance – simplest and cheapest. Known as term insurance because you choose how long you are covered for, say 10, 15 or 20 years. Different types of policies are available. Premiums are usually fixed for the whole term and some can be renewed after a certain period, say 5 years. These policies have no value at anytime and if you cease to pay premiums cover also ceases.

» Whole of life insurance – pays out an agreed sum when you die as long as you are still paying the premiums. This is usually more expensive than term insurance. With these policies part of the premium is invested now in order to fund higher life assurance premiums later to avoid passing the additional cost on to you.

We would normally recommend that any individual life cover established is placed under trust to ensure that the proceeds of any policy fall outside the deceased estate for inheritance tax purposes (IHT).

Critical Illness

» Critical illness insurance is a long-term insurance policy designed to pay a lump sum or income on the diagnosis of certain life-threatening or debilitating (but not fatal) conditions such as a heart attack, stroke, certain types/stages of cancer, multiple sclerosis and loss of limbs.

Private Medical Insurance

» All of us are entitled to free healthcare from the NHS but you may consider buying health insurance so you have a choice in the level of care you get. The cover you get varies and certain treatment is not covered i.e. if you have had problems in the past or the treatment of a chronic medical condition. It is important to research the premiums because this is a competitive market and many policies have a standard excess charge where you agree to pay the first part of any claim i.e. the first £50 or £100.

Other points to think about to ensure you and your family are fully protected

» Check the nominations on your pensions – if you have had a change of circumstance since originally setting up your pension/s i.e. marriage or divorce as examples, it would be a good idea to check who is nominated to receive your pension benefits in the event of your death, if you have nominated anyone at all.

Clearly, with the many options (as examples) I have detailed above, you can see that some careful financial planning is worthwhile in maximising the type of protection you want to consider for you and your family, whilst minimising the impact of this cover on your monthly budget. Your budget for cover will be important and you might want to consider this in advance.

This is for information only and should not be seen or used as individual advice. Seek independent financial advice (IFA) for your own circumstances. Churchouse Financial Planning Limited can provide advice and implement suitable cover to help you with your own individual protection planning.

We look forward to working with you soon.

Keith Churchouse FPFS

Director of Churchouse Financial Planning Limited Chartered Financial Planner

ISO22222 Certified Financial Planner

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority.