Hannah Foxley, Chartered Financial Planner – AKA Finance Girl
Hello ladies and welcome to my first blog. In this and my future blogs, I shall be guiding you through some of the minefield that is financial planning, hopefully without your eyes glazing over in the process, a tall order when I know that financial advice isn’t the most thrilling of subjects! It is nevertheless; extremely important to understand the fundamentals and so I will do my best to help you.
I wanted to start with a subject that is close to my heart and which will also be affected by Gender Equality Act as of 21st December 2012. Our friends at the European Court of Human Rights have decided that it is unfair for insurance premiums to differ based on gender and as of the 21st December, all insurance premiums must be equalised in terms of gender. This is mostly bad news for women as, for many insurances, the premiums are cheaper for us! Specifically, for the insurance that I will discuss, life and critical illness insurance is currently cheaper for women. As of 21st December, all premiums will be raised to the higher amount.
In this blog, I will concentrate on personal protection and in the next blog, will discuss business protection.
Personal protection falls into four main categories;
- Life cover;
- Critical illness cover;
- Income protection;
- Private Medical cover.
This type of protection will pay out a lump sum, or an income for your family, in the event of death. The cover can either be for a specified term; for example to cover a mortgage or to provide and income or lump sum until the children reach a certain age. It can also be taken on a whole of life basis, meaning that it would pay out at any time that death occurred. It should be placed into trust to ensure that it can be paid immediately after death and not have to wait for probate to be granted. A trust can also avoid getting hit with inheritance tax on the proceeds. You will need advice as to what will be right for your needs and to ensure that the correct trust is used.
Critical Illness Cover
This type of protection will pay a lump sum on the diagnosis of many critical illnesses, for example, the main types of cancer, heart attack and disease, stroke and many other nasty’s. Some companies will also make a payment on the diagnosis of the early stages of a particular disease, for example, some types of cancer, which has not yet developed into a full-blown cancer. The benefit of this type of cover is that it will pay you a lump sum of money at a time when you need it most. It can be used to repay debts, pay for adjustments to be made to the home if required, pay for treatment for example, if you had to go abroad to be treated or you can just enjoy the money and do some things that you have always wanted to do.
This is a hugely important cover, which most people take for granted, or think they can’t afford. I made this mistake and paid dearly when I was diagnosed with breast cancer. My friends however, were lucky and had this cover as I had suggested they have some critical illness, and when having heart valve replaced last year (aged 36), got their pay out. Again, it is very important to get proper advice with regard to this as not all companies offer the same level of cover. Even if it is not affordable to have the whole amount that you would like, it is better to have some, rather than nothing.
Not to be confused with PPI as someone has asked me! This cover used to be known as permanent health insurance and will replace most of your income in the event that you are unable to work due to sickness or injury. The income will continue to be paid to you, after a specified period of time (minimum of a month), until you either return to work or the end of the policy (usually retirement). If you returned to work and then were subsequently ill at a later date, the policy would pay out again, hence the term permanent health insurance. Again, this insurance is vital as cancer treatment can last for a year or more (mine has) and income protection cover would allow the time off work to deal with all of this. If you have sickness cover at work, find out how long you will be paid for and then protect yourself for after this ceases. If you are self-employed, this is absolutely vital, as who will pay you if you can’t work? Again, financial advice is vital as not all companies offer the same level of protection and some do not fully cover certain occupations.
Income protection should not be confused with mortgage protection or redundancy cover, which will pay an income to cover a debt for a short period of time of up to two years.
Private Medical Cover
The last area of protection that I would like to explain to you is private medical cover. Having had some of my cancer treatment privately and some of it on the NHS, I can’t stress enough the importance of private medical cover. This cover will ensure that you don’t have to wait for treatment on the NHS, are treated in pleasant surroundings and have your own room and nice food when recovering after surgery. Don’t underestimate how important this will be to you if you ever need it; it is worth every penny! There are varying levels of cover available dependent on what you can afford and are prepared to pay. Again, different companies offer different levels of cover and service and it’s vitally important to get advice.
So that’s a quick, whistle stop tour of personal protection. Don’t think you won’t need it, or that you are young and fit and healthy, I am and thought the same, and I got breast cancer twice in one year, aged 33! I have no cancer on either side of my family, so it’s not hereditary either. This also happened to another friend of mine who was only 29 and was pregnant with her first child at the time. One of my best friends had to have open-heart surgery to have a valve replaced, aged 36 and another of my friends died of a brain tumour, aged 32. It’s shocking and horrible but sadly, these things are very real.
If you think you can’t afford it, can you afford not to have cover and have to endure the stress of how you will pay the bills when you have just been diagnosed with cancer and have a year of treatment in front of you? Believe me, it’s awful having to work through treatment. It is better to have something rather than nothing at all.
The cost of £100,000 of life and critical illness cover for a 34-year-old, female, non-smoker, to age 65 is £1.32 per day, that’s less than your latte! The younger you are when you start the cover, the cheaper it is.
Secondly, yes you can get cover a bit cheaper on the Internet through the comparison websites, but do you know what you are buying? Do you know how much you need, which companies offer what and also which companies have a good track record of actually paying out when you need it? It is vitally important to get advice and it is worth paying for.
Proper protection will ensure that you can pay your bills, have your children looked after and keep your business afloat should the worst happen. Please don’t think ‘my husband has taken care of this’ as he may not have thought to cover you and if he has, the cover is likely to be insufficient. Even if he is the main breadwinner, who would look after the children and the home if you were ill and couldn’t get out of bed, or worst still had died? You need to be covered just as much as he does.
Remember, that if you get your protection in force before 21st December 2012, it’s likely to be cheaper than after this date so act now.
I have made it my mission to become an expert in this area and I have looked under the bonnet of all of the companies and know who offers what. I would be delighted to help you with this and can be contacted on 07595 747969 or [email protected].
Finally, I will leave you with some statistics….
- In 2009, around 320,500 people were diagnosed with cancer, that’s about 519 in every 100,000… That’s in a single year! This is an increasing trend.
- In the UK in 2010, there were 157,275 deaths from cancer.
(Source: Cancer Research UK, July 2012)
I can’t stop you from getting cancer or any other illness, but I can ensure that you are protected financially if it happens.