This plan is designed to pay you a tax- free income for the periods that you are unable to work due to illness or injury. Unlike critical illness protection, which covers serious illness only, it will pay out on injury, serious illness or any other illness that legitimately keeps you off work. There is generally no limit on the number of periods you can claim and if you are off work permanently it will carry on paying you the income until your chosen termination date, which is usually your normal retirement date.
You would normally have a deferment period commencing from when you are off work until the income payments commence e.g. 4 weeks. 6 months etc. The longer the deferment period, the lower the monthly cost you will be charged. The deferment period is generally based on the period you receive sick pay from your employer, as the policy starts to pay out only when this ceases. For the self- employed obviously you will receive no employer sick pay, so you may wish to opt for the minimum deferment period.
The maximum cover is based upon a percentage of your gross income – often about 60%, because the benefit is tax-free and will roughly be equivalent to your take home pay. You can opt for lower amounts of income if you wish. The maximum is based on income during a payment period from the total number of policies you have i.e. you can’t have two policies, both with the maximum income protection.
We have access to a number of general insurance platforms providing crucial cover from a selection of insurers, including:-
Please contact us if you would like a competitive quote.
Term assurance enables you to protect your family and your mortgage against your premature death and/or on contracting a critical illness such as a heart attack or cancer. It will provide you with peace of mind that a tax-free lump sum will repay your mortgage. You can also provide a lump sum to look after your family in the event of your death/and or a critical illness. The tax-free lump sum can replace the cumulative income the family will lose on your death.
The plan is called a term assurance because it covers you for a period of your choice. For example, if you have a 25 year mortgage, then a policy can be taken out for 25 years and will pay out if you die and /or contract a critical illness during that period. It is an inexpensive way of providing cover because it only pays out on these events. It has no investment element or surrender value.
To work out the cover you require to protect your mortgage is easy – the amount of your mortgage over the period of your mortgage. There are a number of ways that you can calculate the term required and lump sum required to protect your family, but you would normally take into consideration the ages of your children and the level of your net income. Our protection calculator will help you decide the level of protection you require and if you wish to contact us, we will introduce you to one of our advisers.
The policy can be taken out on a single life or joint life basis. Joint life means that the policy will pay out on a first death basis in the event of your spouse/partner dying first, or if you have critical illness cover the policy will pay out when the first of you contracts a specified illness during the policy term.
Diverse Mortgage and Protection Ltd are independent and as with all the products we recommend, we can source all the providers and policies available to provide you with your best option.
This is essentially a term assurance policy with all the features detailed above. However, it can be used to protect a repayment mortgage (capital and interest), whereby the cover reduces in line with the amount of the mortgage paid off. This is therefore a low-cost version of term assurance.
Family Income Benefit
Again, this has all the features of a term assurance policy, but rather than pay a lump sum, will pay a tax- free income for the balance of the term selected. For example, a person with a youngest child of three and a net income of £20,000 pa, may choose to take out a policy for 18 years (until the youngest is 21) that pays out £20,000 pa for the balance of the term from when they die and or contract a critical illness. It is in effect a reducing cover plan in as much as the longer into a term an event occurs, the less overall is paid out. For this reason, it is another lower cost version of a term assurance.
Term assurance is also a cost-efficient way of protecting the finances of a business. For example, shareholders or business partners need to consider how they would pay for the share of the business owned by the spouse of a deceased shareholder/business partner. Business owners may wish to protect the firm against the premature death or illness of a key employee. Directors are able to provide cover for their family, through the company in a tax efficient way.
Inheritance Tax Protection
There is also a plan named a Whole of Life Policy. This pays out a guaranteed lump- sum, free from income tax when a person dies and is not term related. As you can imagine, this guarantee of payment means that it is a more expensive form of cover. However, it can be very cost-effective to provide cover for a potential inheritance tax bill on the second death of a couple – very often when inheritance tax bites in to the family estate.
Multi Cover Protection
This plan does not protect against death from natural causes, so does not require medical underwriting.
Instead it provides:-
- Accidental Death Benefit
- Hospitalization Cover
- Broken Bones (including those incurred during amateur sport)
- Accidental Permanent Injury
- Total Permanent Disablement (bodily injury only)
- Funeral cover
- Plus optional cover for your children, including broken bones and cancer cover
- Plus optional cover for UK Health Care Workers to protect against occupational exposure to HIV, Septicaemia caused by MRSA, Hepatitis B, Hepatitis C, Tuberculosis, Clostridium difficile infection
For further information, please contact us.
Diverse Mortgage and Protection provides independent advice on all these plans. For more information click HERE.