Family Finance Weblog

Author: Richard Norfolk

If you see your doctor for a report on your condition, be it general or specific to particular symptoms, you would not unreasonably expect an accurate report. If you were paying for the report, this should put extra pressure on your GP to supply one which would be precise and correct, not vague and open to interpretation.

When applying for life insurance it would appear that around 40% of us have a medical condition which we feel obliged to declare on the application form. This information is then followed up by the insurance company and, provided that it is acceptable to the applicant, they will then contact the GP and ask for a medical report on the individual. This report has to be paid for so the insurance company is quite justified in expecting it to be precise and accurate; unfortunately there are times when it is not.

It is a fact that doctors are often under pressure, with a workload that fails to leave adequate time for attention to details which are apparently rather less than urgent. The result is that there are times when GPs will take the easy way out (presumably to save time) and instead of supplying a report, they will pass on to the insurance company a copy of the patient’s record from the practice computer.

In these circumstances they are not only supplying the wrong sort of information, but they could also be breaking the law by breaching patient confidentiality in supplying information about a patient which the patient had not agreed could be disclosed.

As far as the insurance company are concerned, they have paid for information relating to a specific condition or conditions about which they need full and accurate information, to enable them to assess the risk for life insurance. They are not qualified to take the whole of a patient’s records and from them deduce the risk relating to specific conditions. That is a task requiring a doctor’s skills.

Neither the Association of British Insurers nor the British Medical Association is satisfied with the current procedure. There is concern that the agreement by which insurers are allowed access to some medical information could be damaged if they are allowed open access to the whole of a patient’s medical records.

As a result of this concern an agreement has been made between both parties, whereby the fee paid by the insurance company to doctors will increase by 6% per annum over a five year period. In exchange for this commitment GPs have agreed, through the BMA, to provide the insurance companies with reports of a good quality, which will give them the information which they need. At the same time patient confidentiality will be preserved, as the only information which will be provided will be that which the patient has asked to be divulged.

Thus the cost to an insurer of a GPs report will rise over a five year period from £74.70 to £100. A supplementary report will increase from £19.10 to £25.50 and a medical examination from £82.20 to £110 over the same period.

The BMA have for their part made the point to GPs that life assurance is for the patients benefit and should not be treated lightly; they have asked for accuracy in the preparation of these reports which do after all have a cost benefit for the GPs.

This is a relatively small price for insurers for to pay for accurate information, which should in itself save costs for them by providing dependable facts.

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Author: Catriona Singfield

In the UK, as with the rest of Europe, we are now living longer than at any time in the past – and the figure is rising. The average lifespan for a British man is now 76.2 years, with a woman living even longer at 80.7 years. This is excellent news, but sadly there is a downside – we may be living longer, but we’re not as healthy as our fellow Europeans.

According to an EU survey on the subject, conducted over a sample of 60,000 people, longevity is not the only index of old age we should be paying attention to. The survey made a study of age of death, sickness and overall health. Healthy life years, the amount of time we can expect to enjoy an active, able old age, are just not matching up to lifespan.

Out of a average life of 76.2 years, a British man can expect to enjoy only 61.5 years in good physical condition. In the European league table of health, we are fifth from the bottom.

However, it is important not to jump to conclusions too early because as yet, no-one is sure exactly why the study has come up with these findings. There are wide variations across Europe, with cardiovascular disease being far more of a risk the further north you live. According to action group Help the Aged, we are putting ourselves at risk because we do not take one simple factor as seriously as we should - the cold. Failure to wrap up can lead to thickening of the blood, perhaps even a fatal clot. Surely an incentive to keep warm!

The healthiest Europeans are the Italians, with an average of 70.9 healthy life years over a total lifespan of 76.8 years. It’s well known that in Italy, the national diet includes a lot of vegetables and fish, with few saturated fats, which may be one reason why the Italians are living more healthily for longer. Again according to Help the Aged, these differences could be caused by several factors: better diet, the quality of the Health Service, the weather, and prevalence of smoking.

Indeed, in a recent league table comparing healthy life years and lifespan, Italy is number one. Next come Spain, Germany, Poland, the Netherlands, and the UK, followed by France, Hungary, Portugal and Finland.

The figures are interesting. For example, a Finnish woman can expect to live for 81.8 years, but only 56.5 years will be free from ill health, defined in the study as a disabling condition.

Taken together, all these factors point to one conclusion: the average man or woman would be well advised to look for good critical illness cover, not only life insurance. Consider this sobering fact: the average age of retirement now comes after the average age at which ill health sets in – by between three and a half and eight and a half years. The recent rise in official retirement age is matched by many people’s expectations of being not just available, but able to work into their 70s.

So what is critical illness cover? Briefly, this is insurance that pays out if you are diagnosed with a serious condition, for example cancer, a stroke, or heart disease. Be sure to check the policy carefully, as not all policies cover the same conditions. Consider that such an illness can affect your entire lifestyle. You may need to change or even give up your work, or alter your house or car. If you have good critical illness cover in place, at least you can be sure that your needs can be met financially.

If you have a family, you may like to consider what the effect would be were you not there for them. No-one likes to think of the worst happening, but it is only sensible to take a careful look at your life insurance options.

Fortunately, it’s easy to find out good information on these types of insurance, for both cost and cover. Go online and find an Internet insurance broker, who will be able to search for you to find the most competitive quote.

Once you have your plans in place, there’s only one more thing to do – beat those tables and enjoy your old age!

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Author: Dot Piper

There’s a new critical illness policy on the market which attempts to go some way with regard to sorting out the perplexity regarding exactly what is, and is not, covered when it comes to claiming on the policy.

Traditional critical illness policies tend to cover up to 35 listed medical conditions. Policyholders could become seriously ill with a condition that doesn’t fall into the scope of the policy and find that their illness is not covered, whilst others may be diagnosed with a listed illness with a lower “grading” which is relatively easily treated, for which they get a full payout.
Because of this inequality, the Financial Services Authority is uneasy with regard to insurers failing to fully understand that cover is restricted to certain specific illnesses.

This new product is marketed by the Prudential, under the name of the Flexible Protection Plan, and is unusual in that it claims to cover an amazing 140 medical conditions. However, cover is based on the severity of the condition which could possibly cause some uncertainty regarding the grading of these illnesses.

This is how the plan works:

Listed in the policy are practically all serious illnesses and the payout when one these is diagnosed will be graded according to the severity of the condition. The Prudential says that by tying payments to the degree of seriousness of the illness means that more payments can be offered to people with debilitating illnesses, who may otherwise get nothing at all. An example of this is that should you lose the sight of one eye; the Prudential policy will pay 25% of the sum assured. Normally, critical illness policies would only pay out when total blindness occurs. In all, 140 severe conditions are covered.

A spokesman for one of the specialist financial advisers welcomed the range of the policy, but voiced some concern regarding the implementation of these severity-based payments, saying that it would be open to argument as to what level of severity some illnesses would be graded as. It was felt that it would not be advisable to enter into this type of policy unless you had a very clear understanding of exactly how it would work. We quote “It will be up to the consumer to decide whether a guarantee of getting a smaller payment is better than possibly getting nothing.”

The cost of this new policy is approximately twice as much as conventional critical illness cover.

If your main concern regarding insurance cover should you become critically ill would be the financial outcome, it might be better to consider life insurance. Particularly, if you have a family to support, you may need something that is going to guarantee their lifestyle in the worst case scenario and with the addition of some income protection cover, which would meet outgoings in the event of you becoming unable to work due to illness. This type of cover, unlike the critical illness policy, protects you against common conditions, which result in you being unable to carry out your work.

The best course of action would be to contact a broker and check out the alternatives. The internet’s a good place to start and there are some good internet discount’s available, along with plenty of advice. A good broker will be able to compare the products available and come up with the right insurance product for you.

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Author: Dot Piper

There’s a new critical illness policy on the market which attempts to go some way with regard to sorting out the perplexity regarding exactly what is, and is not, covered when it comes to claiming on the policy.

Traditional critical illness policies tend to cover up to 35 listed medical conditions. Policyholders could become seriously ill with a condition that doesn’t fall into the scope of the policy and find that their illness is not covered, whilst others may be diagnosed with a listed illness with a lower “grading” which is relatively easily treated, for which they get a full payout.
Because of this inequality, the Financial Services Authority is uneasy with regard to insurers failing to fully understand that cover is restricted to certain specific illnesses.

This new product is marketed by the Prudential, under the name of the Flexible Protection Plan, and is unusual in that it claims to cover an amazing 140 medical conditions. However, cover is based on the severity of the condition which could possibly cause some uncertainty regarding the grading of these illnesses.

This is how the plan works:

Listed in the policy are practically all serious illnesses and the payout when one these is diagnosed will be graded according to the severity of the condition. The Prudential says that by tying payments to the degree of seriousness of the illness means that more payments can be offered to people with debilitating illnesses, who may otherwise get nothing at all. An example of this is that should you lose the sight of one eye; the Prudential policy will pay 25% of the sum assured. Normally, critical illness policies would only pay out when total blindness occurs. In all, 140 severe conditions are covered.

A spokesman for one of the specialist financial advisers welcomed the range of the policy, but voiced some concern regarding the implementation of these severity-based payments, saying that it would be open to argument as to what level of severity some illnesses would be graded as. It was felt that it would not be advisable to enter into this type of policy unless you had a very clear understanding of exactly how it would work. We quote “It will be up to the consumer to decide whether a guarantee of getting a smaller payment is better than possibly getting nothing.”

The cost of this new policy is approximately twice as much as conventional critical illness cover.

If your main concern regarding insurance cover should you become critically ill would be the financial outcome, it might be better to consider life insurance. Particularly, if you have a family to support, you may need something that is going to guarantee their lifestyle in the worst case scenario and with the addition of some income protection cover, which would meet outgoings in the event of you becoming unable to work due to illness. This type of cover, unlike the critical illness policy, protects you against common conditions, which result in you being unable to carry out your work.

The best course of action would be to contact a broker and check out the alternatives. The internet’s a good place to start and there are some good internet discount’s available, along with plenty of advice. A good broker will be able to compare the products available and come up with the right insurance product for you.

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Author: Michael Challiner

Thinking of giving up smoking? Maybe the thought of England’s 2007 smoking ban in enclosed public places is niggling away. Could this be the spur you need to finally kick the habit? Think of what you could buy with the money saved – that holiday the family have been talking about, your son’s new bike, simply more money to spend maybe?

Here are some more thoughts:
· Several thousand people have given up smoking since the ban came into force in Ireland and Scotland.
· It has been found that the average smoker spends over £90,000 in a lifetime.
· The Health Development Agency tells us that smoking is “the biggest single cause of illness and premature death, killing some 83,200 people a year in England alone.”
· Become a non smoker and you’ll save around 50% on your health and life insurance premiums, not to mention living longer!
· Your health will undoubtedly benefit. Also the health of your family. Passive smoking creates risks too!

Life and critical illness insurance premiums are rising. The popularity and ease of access to the internet over the past few years has encouraged people to search for lower and lower insurance rates. Insurers have cut the cost of cover as much as they can in order to be competitive, but the underwriters have now decided the time has come to redress the balance. The insurance company will publish their standard rate, which will be based on fit and healthy individuals. There will then be an increased premium for those that the insurers feel are at risk of health problems. That means you!

It doesn’t take long for the insurance companies to consider you’re a safer bet for them. Most companies accept you are a non-smoker after 12 smoke-free months, although a few require a little longer and it can be as long as 5 years. Once you’re successfully over this (normally 12 month) period you can start to think about your future insurance needs. The first thing to do is to contact your insurer and ask for you policy to be re-assessed.

Be completely truthful – any claims will be thoroughly checked and your Doctor will be asked to confirm that you are a non-smoker. If anything is out of order, the claim will be rejected under the insurer’s non-disclosure rules.

The new quote will show a big reduction in the premium. You may well be able to save even more money by searching the internet to find out what other companies have to offer. If you decide to change insurers, don’t cancel your original until you’re certain that you’ve been accepted by the new company, after they’ve checked your application form including details of health records. Cancellation charges won’t apply to the old policy, so it’s simple to change insurers. You don’t even have to let the old company know, simply cancel your direct debit and when it’s queried just say that you no longer need the policy.

No one said it would be easy, but it has to worthwhile. For the sake of your health. Good Luck.

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Author: Dot Piper

If you’re planning a pregnancy or are newly pregnant, may we congratulate you? Naturally, your mind may be filled with all manner of things, from your first scan-date to how to choose a suitable, up-to date name without upsetting the excited grandparents-to-be. Dare we ask, have you thought about insurance?

If you choose to take out life insurance, then without a doubt, the right time is before you become pregnant. Once into the pregnancy it may become very much more difficult to be accepted by insurers. Particularly with a first pregnancy, you never know what complications might arise. Whilst the vast majority of pregnancies proceed without any complications whatsoever, some conditions can crop up, such as gestational diabetes or high blood pressure, which insurers would consider as a greater risk. If cover is offered once one of these problems is diagnosed, the premium could be raised by up to 50%. If this happens it may be a good idea to accept the increased cost and change to a more economical policy when the baby is a few months old.

There are some cases where women have applied for cover after experiencing problems, only to be told that the will only be accepted after the child is born and everything is fine. One insurer told us that as lifestyles change and women are starting their families after they have reached their mid-thirties it is increasingly likely that they will delay cover until after the birth.

In the case of a single parent, you are going to have a tiny individual totally dependant on you. In the event of your death, it is doubly important that provision has been made for the care of that child, both personally and financially.

For two-parent families, whilst the pressure is less, it still makes sound sense to cover for the financial implications of bringing up a family single-handed. There is a case for arranging separate life cover and the cost of two single policies would be only minimally more expensive. As an example:

· Level term assurance, over 25 years, for a couple aged around 30, would cost around £16 per month for £150,000 worth of cover. The policy would pay out on the death of the first partner.
· The male partner taking out the policy over the same term would pay £10 per month and the female partner would pay £8.
· These figures assuming that both are non-smokers.

That’s a cost of £2 per month more, but both partners are covered. There’s also a lot more flexibility in arranging single life policies in that if one of the couple earns considerably more than the other they are able to arrange insurance for a higher sum, in order to maintain the standard of living of the family, should the worst happen.

It’s a sensible step to arrange your insurance prior to your first pregnancy for another reason too. Should you be diagnosed with a condition which would upset your insurers, you’d be covered for subsequent pregnancies as your insurance is for life.

So, log on to the internet and see what the brokers can offer you. You’ll only have one lot of form-filling to do and they’ll come up with a range of deals to suit your circumstances. The internet discount may come in useful too. Now, having got that out of the way, which website offers advice on naming the baby?

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Author: Dot Piper

Private medical insurance policies are becoming increasingly used tools. NHS waiting lists just don’t fit in with many people’s busy lifestyles and a convenient appointment and treatment may be top on your priority list, should you or your family fall ill.

As with all insurance products, private medical policies vary in their terms and are specific about what they do and don’t cover. For instance, one of the most well-known insurers, Bupa, will only cover you for “experimental” medical treatment where that procedure is part of a valid medical trial or study. Another well known insurer, Norwich Union Healthcare is only happy to cover treatment that is classed as standard practice in the UK.

It could be that your private care doctor feels that the best treatment for you would be one of the newer ones, as opposed to an older, standard, procedure. Obviously you’d probably be happy to accept the doctor’s recommendations. You could then be in the situation where your insurance company would not cover the cost of this treatment.

Where these problems have occurred, patients have submitted complaints to the Financial Ombudsman Service, otherwise known as the FOS. As a result of this, the FOS has, in some cases, ruled against the insurers and it has been possible to include some of the newer treatments in practice. Laser treatment has replaced larynx surgery in some cases, and key-hole, rather than open-wound, bladder treatment can now also be covered.

Although used in the USA for five years as standard practice, there was a new form of varicose vein surgery which insurers in the UK were declining to pay out on, until the FOS decision was made to accept the treatment.

It appears that the FOS can only overturn the decision of the insurer regarding experimental treatments where such treatments are not specifically excluded in the policy. If the policy is specific about exclusion of these treatments, the ombudsman will not be able to help.

The FOS says “If the policyholder has been advised by his or her treating physician that, in their particular circumstances, they should have a newer treatment instead of an established procedure, our general view would be that it could be unfair for the firm to turn down the claim entirely.” However, they also point out that, by ruling against the insurers, it doesn’t follow that they endorse specific treatments.

The response of the insurers to these rulings seems to be that they may well be re-considering their position in regard to experimental treatments and how they deal with them. Norwich Union have stated that a review of their policies is in the pipeline in view of the rulings of the FOS. Bupa are concerned that their clients may be claiming for treatments not yet tested in the UK.

WPA, another medical insurance provider, have stated that if a doctor has recommended a specific course of experimental treatment, for which there are grounds to prove why that treatment is better than any other, then they will cover this.

It appears that things are falling into place and necessary changes are taking place regarding the experimental treatment scenario. If you’re about to take out this valuable insurance, it’s as well to keep all these issues in mind. By logging on to the internet and finding a broker who will compare what’s on offer from the many policies available in the medical insurance market, you’ll be able to find the right policy for you and your family. At the right price too.

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Blogg entry Fri 14th July

Author: Emma Mayo

It looks like some life insurance policies are forever – because people have been forgetting to tell their next of kin just exactly what they did with their policy documents. It’s not that quite simple, there are many reasons why a life insurance policy may sit unclaimed – but as a result it is estimated that at least £2 billion in life insurance claims have been left unclaimed. Surely that’s more than careless!

There are a myriad of reasons why life insurance policies get forgotten:

People forget that they took them out in the first place.
People often don’t leave a Will; as a result relatives have no evidence to show there was a policy, unless they come across some paperwork.
One in 16 people move house and forget to inform financial companies that they have moved, and lose touch completely.

It can get even more complicated. There were a lot of life assurance policies sold in the later half of the 20th Century which doubled as savings vehicles, and were very popular at the time. As times have changed and companies have been bought by larger companies, they have disappeared off the radar, but the money will still be there – waiting to be claimed one day.

If you have a life policy and the company no longer exists, the Internet is the best place to look. Search on the company name in Google then you should be able to get some information relating to the company that now owns the policy. If that fails, then try the Association of Friendly Societies on 020 7216 7436 (www.afs.org.uk) - a trade body that has old records relating to friendlies and mutuals from the past.

If that doesn’t work – call the Mutual Societies Registration on 020 7066 4916. The old Register of Friendly Societies, they are a government body that has now been swallowed up by the Financial Services Authority, but they will be able to tell you what happened to the company that used to hold your policy, and who you should now contact.

If you don’t even have the name of the company, but you know that you have a life policy out there somewhere – then even then all is not lost. There is a service called the Unclaimed Assets Register (www.uar.co.uk, 0870 241 1713) that can help you. They have a huge database containing details of financial products across the board, from dividends and unit trusts to pensions and life policies. If it’s a basic enquiry, then the service may be free of charge; otherwise they charge a one-off, fixed charge of £18.50 to find an answer to your query. 10% of that fee goes to charity. You can make the enquiry either over the Internet or by post, and you will need to provide a certain amount of detail such as date of birth and previous addresses.

In making any of these enquiries incidentally, you must either be the policyholder or have power of attorney over another’s finances.

In an ideal world, everyone would keep all their financial documentation in one place. But the very nature of a life policy means that they sit around for years and often get forgotten. Our advice is, whether you are the policyholder or if you have power of attorney, find as much information as you can before starting your search. And don’t give up – the information is accessible, it may cost you just a bit of time and effort, and possibly £18.50, to find it.

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Author: Emma Mayo

The costs of smoking are well documented. High blood pressure, heart attacks, lung cancer – smokers know why it’s such a bad habit. The facts are humbling. 80% of non-smokers can expect to live to over 70, only 50% of smokers can. Also, 50% of smokers will die from a smoking-related disease. These diseases are often long, drawn out and very painful.

At over £5 for a packet of 20 cigarettes, they are also aware of how much it’s costing them monetarily. But the financial implications stretch further, meaning that smokers have to pay hundreds more for their life insurance.

Insurance companies classify anyone has who used any tobacco products in the twelve months before making the insurance application as ‘a smoker’. Statistics show that people that smoke are more likely to make a claim, so naturally the premiums are higher for smokers – but the margin is surprisingly high. A male 35-year-old smoker will pay 78% more in life insurance premiums than his non-smoking counterpart. It’s not much better for women – a smoker of 35 will pay 72% more. For £100,000 worth of cover over 20 years, that’s a difference of over £1,500. Add that to the cost of all those cigarettes at a rate of 20 a day, and that’s another £36,400 smoked up the chimney! Smoking certainly is an expensive habit…

Despite the extra cost implications, don’t be tempted to save money on life insurance by pretending that you don’t smoke. If you do need to make a claim then the insurer will most likely discover that you were in fact a smoker, and would use that as grounds to reject the claim. It simply isn’t worth the risk.

Some insurers have developed methods to make sure applicants cannot lie in any case. There is a saliva test that can reveal whether you are a smoker or not – and some insurers ask potential customers to take the test before they will insure them.

For people that do manage to give up the demon weed – they’ll have to wait for twelve months before telling the insurer and hopefully benefit from lower premiums. However, they’ll almost certainly get a better deal by shopping around on the Internet. Without the added expense of smoking affecting the quotation, the best bargains will be there for the taking.

Here are the two main reasons why people should give up:

Health – smoking is a sure fire way to shorten life span, and make things like running and exercise a lot more difficult.

Money – this article has already spelled out just how much smoking costs, that money could be far better spent on holidays and other luxuries.

If they’re not enough, there’s plenty more – like keeping a seat in the pub for example! Many pubs have already banned smoking. By 2007 smokers will be well and truly out in the cold.

If this article has inspired you to take a serious step towards giving up smoking, also have a look at www.quit.org.uk, representing the charity dedicated to helping people to quit the habit. The website www.givingupsmoking.co.uk is also a helpful port of call, and you can ring the NHS smoking helpline on 0800 169 0 169.

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Author: Dot Piper

How does 100% off the cost of next year’s health insurance premium sound?
This is on offer through the Prudential Insurance Company’s Pruehealth. They offer their Comprehensive Plan and here are the details, based on a 40 year old non smoker in good health: The monthly payment for a male would be £62.85 and for a female £66.43, there is an excess of £100. The premium is reduced if you gain “vitality” points and this is how it works:

At the end of the first year there is a discount of 25% and you earn further points and therefore further discounts, by improving your health. Measures such as reducing your blood pressure, taking fitness assessments and regularly visiting the gym are encouraged. Cheap gym membership is on offer. There is a website offering encouragement and handy tips about diet and exercise.

When checked with other medical insurance policies, the Pruehealth policy mentioned above came out more expensive than those of General Medical, Health-on-line and Axa PPP. General Medical, for example, offers their Foundation Plus First Choice policy. The premium again based on a 40 year old non-smoker, male or female, is £48.05. The excess is £100.

As the cost of insurance rises with age, inevitably the insurers are going to have to recoup their costs. Some work their premiums out based on age bands and the cost of insurance can jump sharply as you move up from 40 to 49, 50 to 59 and so on. Rather than sudden increases in the premium, many companies increase by a smaller amount, but apply this yearly.

At a time when private medical insurance seems to be roaring away and the very people that need it most are starting to cancel their policies, it’s clear that something needs to be done. Medical inflation accounts for an 8% rise in premiums per year, as new drugs and diagnostic equipment cost soar.

Consumers can feel reassured by some of the latest changes on offer in a bid to address the problem. One idea is suggested by Penny O’Nions, of the specialist broker Onions Group. They have a plan which covers inpatient care only. Any private outpatient care would have to come out of your own pocket and whilst most serious illnesses such as cancer would involve hospitalisation, increasingly these are treated in outpatient facilities and therefore wouldn’t be covered.

An excess on your policy (the part you pay yourself in the event of a claim) can gain large savings in your premium. By paying an excess of £100 you could save around 10% and if you’re prepared for an even bigger excess, say £2000, you could halve the amount you pay. This effectively puts a ceiling on the costs of illness.

No claims discounts usually apply to these types of policies and you should be able to transfer these if you decide to “jump ship”.

As you can see, there’s a vast range of options. Many people stick to the same old policies, feeling it’s just not worth the effort of transferring but in fact it couldn’t be easier. Just go to your favourite search engine, search for insurance brokers and find one which offers health insurance. They’ll take your circumstances into account and find the best deal for you. There’ll be the additional bonus of an on-line discount.

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Cover for your children is the most undervalued aspect of critical illness insurance. But as most policies automatically provide the cover as a free extra, we suspect that some policyholders don’t even know they’ve got it!

Most policies automatically insure your children albeit at a lower level of benefits than the main policyholders cover. But this cover is invaluable, especially if your child becomes critically ill and you need to take time off work to provide care.

Critical Illness insurance pays out a tax free capital sum if the policyholder, or one of their children, suffers one of the very serious illnesses scheduled on their policy. The only rider is that the claimant must survive at least 28 days after the diagnosis.

Scottish Provident, one of the UK’s largest critical illness insurers has announced that claims for children is now its fourth-largest cause for a claim. Says Nick Kirwan, their Protection Marketing Director, “Work takes a back seat when your child becomes ill. You may need to cut your working hours or even stop working altogether”.

If your critical illness policy does insure your children, then a payout from the policy gives you the financial flexibility to do just that. So how much will they pay out?

Most insurers will pay a proportion of total insured value if a child becomes critically ill. For example, Norwich Union will pay out 50% of the insured sum or £10,000 whichever is the lower – and this cover includes adopted children and step children. Standard Life and Legal & General also pay up to 50% with Standard setting the maximum payout at £25,000 and in L&G’s case it’s £15,000.

Cover never starts as soon as the child is born. With some policies cover starts up at 3 months but others wait as long as three years. Ideally, you want cover to start as early as possible.

Another other point to understand is that if the main policyholder has a claim, then the policy pays out and terminates – they can’t claim more than once. But if there is a claim for a child, the policy does not terminate – the cover for the policyholders continues unaffected. And if you start or add to your family after you’ve started the policy there’s no need to inform the insurer as the cover automatically covers all your children.

But not all insurers will insure your children. Neither the Halifax, National Westminster nor Nationwide Life include any cover for children. So if you have or intend to have a family, it’s vital that you tell your adviser and then he or she will ensure your policy includes the necessary cover.

And that brings us to the topic of professional advice. You can buy Critical Illness insurance online all by yourself but honestly it isn’t worth the risk. In our experience over 50 % of DIY buyers don’t get it exactly right. There is little standardisation within critical illness insurance so you’re unlikely to get your ideal policy if you buy on price alone. It’s one of those situations where a low price can turn out to be a costly mistake!

In order to get the ideal policy your adviser need to understand how much you can afford and what aspects of cover are most important to you. It’s then a matter of using experience and product knowledge to find the best options. If this sounds like a receipt of throwing your discounts down the drain, it isn’t.

Very few high street brokers will give you any discount but shop online with one of the specialist critical illness brokers and you’ll get full service and a discount. How do you find them? Well actually, you don’t need to look any further. This web site works with a specialist critical illness broker called ClickLife.

Why not get a quote now?

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Smokers have less money to burn that the rest of us – that’s because on average, smoking costs them £92,000 during their lifetime.

So the forthcoming ban on smoking in enclosed public places which comes into effect in summer 2007 is surely a great time to take your last drag! Similar smoking bans already in force in Scotland and Ireland, have persuaded thousands and thousands to give up.

Indeed, recent figures from the Health Development Agency show that smoking is the biggest single cause of illness and premature death, killing some 83,200 people a year in England alone! It’s not surprising therefore, that health considerations are the most persuasive reasons for kicking the habit – but there are some significant financial reasons as well!

As smokers and ex-smokers alike can testify, it’s far from easy to quit the habit – but along with the health dividend, the thought of extra spending money should provide a major incentive. Reformed smokers could put some of their newfound money into savings or pay off debts quicker, or even overpay their mortgage. Even more holidays come into play!

And life insurance is another area to make big savings. Smokers frequently pay up to twice as much for their cover than non-smokers and it seems as if premiums for smokers are still rising. That’s because for some years now the insurance companies have been locked in a price war fuelled by the Internet.

People searching the Internet for low prices, have forced the insurance companies to cut their standard rates – these are the rates they quote all their initial enquiries. But the insurers have had to recover some of their revenue in other ways. What we have seen is a tightening of underwriting criteria. This means that anyone who is not a lithe, fighting fit non-smoker will have to pay non-standard rates – to you and me, that means more! And as smokers expose themselves to a self imposed health risk, they get hit in the neck!

So giving up smoking is a really good way to save on your life and critical illness premiums. Most companies won’t classify you as a non-smoker until you’ve fully given up for a least a year - and some even want five years. But once you’ve passed the 12-month stage you need to contact your insurer and be re-quoted. And don’t be tempted to lie because that’s false economy. If you were subsequently to make a claim, the insurer is certain to seek confirmation from your Doctor that you were a non-smoker and if that was wrong, the claim would be thrown out under the policy’s non-disclosure provisions.

Once you have the re-quote you’ll see a big reduction in the premium but don’t accept it automatically. The odds are that you’ll still get a cheaper quote elsewhere on the Internet – and what better place to start than our web site!

Just a word of warning. If you do find it’s cheaper to switch, don’t cancel your existing policy until the new policy is confirmed and in place. That’s because it’s always possible that the new insurer will revise their initial quote upwards when they’ve seen your full application details and health record. Only cancel your existing policy when everything’s in place with your new policy.

And it’s quite easy to terminate a policy – simply cancel your direct debit! After a few weeks the insurer will contact you to find out why - just tell them you don’t need the policy anymore, and that’s that! There are no cancellation charges just more savings in the bag.

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In the last Budget, Gordon Brown put back the clock some twenty plus years by announcing that life insurance can attract tax relief. However, tax relief only applies to a particular new sort of life policy.

The initial response from life insurance professionals was subdued. That was until the full extent of the savings became appreciated. Standard taxpayers can save around 15% and higher rate taxpayers can save a hefty 30% off the cost of their life insurance premiums. And it now looks as if up to 50% of all new policyholders can make these savings!

These new policies are marketed under a number of names ranging from Level Term Pensions Life Insurance to just plain Pensions Life Insurance. But don’t be put off by the word “pensions” – you don’t have to buy a pension and neither do you have to have a pension already! The word “pensions” is there because the legislation which introduced the tax loophole for these policies is part of a wider change in tax legislation which relates to primarily to pensions and Inheritance tax.

You should be aware that not everyone will qualify for these tax savings and a Pensions Life Insurance policy will not suit everybody. That’s why these policies must be bought from a broker who will advise you. And because of the nature of these special policies, at the moment you can’t get a live quote on your computer screen – the broker will have to get competitive quotes and phone you back.

So what does Pensions Life Insurance do? It pays out a lump sum if the policyholder dies or is diagnosed with a terminal illness which will result in death within twelve months.

But there’s only one type of policy available: there can only be one policyholder (joint policies are not available but you could take out a policy for yourself and a separate policy for your partner), and the cover remains constant for the duration of the policy. Neither can you add critical illness cover into the policy.

That means that a Pensions Life Insurance policy will not be the cheapest way to protect a repayment mortgage unless you’re happy to buy more cover than you actually need to repay the mortgage. If sadly, there is a payout, then with a Pensions Life Insurance policy, your mortgage would be repaid and any the surplus could go to your family. However, if you want the cheapest way to protect a repayment mortgage, then a low cost Mortgage Life Insurance policy with decreasing cover will almost certainly be the best solution – but you won’t get tax relief on your premiums!

Now you may be wondering why the savings you’ll make are less than the value of your tax relief. It’s because on average, Pensions Life policies are some 15% more expensive than a like for like conventional life policy. The insurance companies are charging more for them because they have more work to do to reclaim the standard rate tax relief.

If you’re a higher rate taxpayer, you’ll get the standard rate of tax deducted from your premium by the insurance company but you’ll have to reclaim the difference between standard and higher rate tax via your Annual Tax Return. Once you’ve entered this on your Return, H M Inland Revenue will continue automatically to award the relief for the policy’s duration.

By now you will have begun to appreciate why we believe that you must get advice before you buy one of these tax relief policies. If you aren’t already convinced, consider the some more elements which the Chancellor of the Exchequer threw in!

You cannot have a Pensions Life Policy if your pensions contributions plus your life insurance premiums are greater than £215,000 per year. That shouldn’t worry too many people!

Then you have to factor in that if the value of your pension fund plus the payout from the policy exceeds £1,500,000, then you will be taxed at 55% on the excess! (Conventional life insurance policies are excluded from this calculation.) Again this restriction shouldn’t concern too many people - but you have to be aware of it.

So in summary, the information we are receiving indicates that around 50% of people will find that Pensions Life Insurance is the cheapest solution for their life insurance needs.

But, we repeat, do not buy it without expert advice.

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The latest figures from the insurance companies continue to show large numbers of rejected claims. Whilst the figures do vary between insurers,
On average they work out at around 1 in 5 claims are rejected. (see below).

Critical illness insurance pays out a tax free lump sum if the policyholder is diagnosed with one of a long list of qualifying illnesses and conditions included stipulated on the policy.

The biggest reason for claim rejection is that the insurer has identified that the policyholder failed to fully disclose their medical condition when they originally applied for the insurance. This always results in conflict between the insurer and the policyholder so our best advice is always disclose everything, no matter how small or insignificant you think it may be.

If you do make a claim, your insurer will always search through your past medical records to satisfy itself that you had disclosed everything at the time you made your application. Then if they find that you did omit medical information, they have a valid contractual reason for refusing your claim.

In some people’s eyes this makes critical illness insurance the least reliable form of insurance – but we disagree. We say if you’ve disclosed everything about your medical history, no matter hoe small, then there should be no problem.

Having said that the rejection figures from the insurance companies do vary, so it may be that some are more stringent than others.

Rejection rates published by UK insurers

Insurance Company Percentage of Critical Illness Insurance claims rejected

The other factor that affects the rejection rate is that more recently issued policies tend to have higher claims and higher rates of rejection. So if an insurer has not been in the market for a long time, or it has had a major sales campaign on critical illness insurance during the last few years, then it’s rejection rates will be higher.

Our advice is buy the critical illness policy that suits you best and on your application form, fully disclose everything about your health. Don’t miss anything out. Then you’ll be OK

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Weight and the way people want to see themselves, convinces lots of people to go on a diet and others to deceive themselves that they’re on a diet. The loss of a pound or two occasions delight and celebration, whereas the same two pounds going back the next day remains unannounced. Ring any bells for you?

Well normally, a porky or two about your weight doesn’t harm anyone other than perhaps yourself. But now life insurance companies are taking a much closer interest. They suspect that lots of people are carrying their creative assessment of their weight and height onto their life insurance application forms.

One of Britain’s largest life insurers, Scottish Provident, is tightening up its application procedures because experience has shown that applicants often lie about their weight. Now, as well as asking them their weight, they’ll be asked when they last weighed themselves. It’s a move to encourage them to answer more accurately rather than pluck a figure out of the air.

A spokesman from Scottish Provident said, “We know that people normally understate their weight, mainly because they are in denial about the subject, although there are also some people who will lie just to get cheaper premiums”.

The British are now the second most obese nation in Europe – second only to Greece. 21% of British adults are now classified as obese and a quarter of these do not want to lose weight despite the risks to their health according to a survey from by Cancer Research UK.

The British Medical Association considers any one with a body mass of 25 or more to be obese but most insurers are now using 30 as their limit. Above that figure and you’ll find that they will load your premium. Someone who is overweight may well see their premium loaded by 50% and extreme cases will be refused life insurance cover.

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Thanks to the latest budget changes, you can now buy life insurance and get tax relief. But the tax relief is only available on a new special type of life policy. You can’t get tax relief on your existing life insurance.

These new life policies exploit provisions in the new Finance Bill and should result in savings of between 5% and 15% for a standard tax payer and around 30% for a higher tax payer.

But you must be aware that there are strings attached! You have to buy an absolutely standard life policy. You can’t add extras such as critical illness cover and the insured sum must be a fixed sum. And only one life can be insured on each policy - it has to be a bog standard, level term, single beneficiary, life insurance policy.

The Chancellor has added more restrictions, but quite frankly, these are unlikely to pose a problem to anyone unless they’re extremely wealthy!

You can’t have one of these new style life policies if your annual life insurance premiums plus the annual contributions you make to your pension fund exceeds £215,000. Furthermore, if the when you die, the value of your pension fund plus the payout from your life policy exceeds £1,500,000, the current lifetime limit set by the Chancellor, then any excess will be taxed at 55%. Payouts from conventional life insurance policies are not part of this calculation.

Standard tax relief on the premiums is automatically collected by the life insurance company so you pay a lower premium which already reflects standard rate tax relief. If you are a higher rate taxpayer, you’ll have to claim an extra tax rebate through your self-assessment tax return. However, once you’ve told your taxman about your policy, you should automatically get your tax relief through your ongoing tax code.

So why are the savings at around 5% to 15% for a standard tax payer and around 30% for a higher tax payer, less than the value of the tax relief? Well, the life companies have to administer the tax relief and there are certain operational restrictions imposed on the insurance companies by the Inland Revenue - and this adds to the insurance costs - so the premiums are a little higher than conventional life policies. But after the tax relief you should make worthwhile savings.

As with all these tax changes, you must be aware that the Chancellor could remove the tax relief at a later date. Having said that, it’s rare for a tax change to be applied retrospectively, so you are likely to be safe. Your income could also drop and move you into a lower tax bracket. This would decrease your savings.

These new life insurance policies are now available from most of the big UK life insurers and life insurance brokers. However, you won’t be able to get a quotation online – you’ll have to get one on the phone from a Life Insurance Adviser.

And just to confuse matters somewhat, these policies are known under a range of names: Pension Term Insurance, Life Insurance with Tax Relief, Life Protection with Tax Relief – but they all mean exactly the same thing.

And just to confirm one common miss-understanding, no, you don’t have to buy a pension at the same time!

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If you run a small business you know that if a member of your team was taken seriously ill or died, your business would be hard hit. Sales or production could fall, key skills could be lost and the general pace of the business could fall.

Insurance is available to offset those financial risks, risks that are potentially most serious in a small business. After all in smaller businesses other employees can’t be moved across to fill the gap - there’s simply noone spare so the problem remains until the person either returns to work or has to be replaced.

If the person is off sick with a serious illness such as cancer or a heart attack you simply don’t know when, or if, they’ll return to work and management is caught in a cleft stick. Do they take on a temporary employee or a permanent employee, or are you forced to simply wait until matters resolve themselves? And how much will all this cost the business in terms of both extra costs and lost sales and profit?

Traditionally, it’s Keyman Insurance that’s covers these very real risks but nine out of ten small businesses still don’t carry this insurance. It’s either because they haven’t thought about it or they’ve found it to be too costly.

A spokesperson for the Federation of Small Businesses said, “In an ideal world, small firms would be insured against everything, but reality demands the businesses prioritise threats and occasionally take risks”.

But there is a cheaper potential solution. It’s called Group Critical Illness Insurance and it’s about half the price of standard Keyman Insurance.

With Group Critical Illness Insurance, the company decides which employees to insure and how much to insure them for, pays the premiums and receives all lump sum payouts. Claims can be made as soon as any of the insured people are diagnosed with a scheduled critical illness and the policy will list a long list of chronic illnesses that are covered. As you would expect heart attacks, strokes and cancer are the biggest three biggest reasons for claims but the full list is much longer. For example, kidney failure, meningitis, CJ Disease and even blindness.

The important point to realise is that for the company to make a claim, the insured employee must survive at least 28 days after they are diagnosed with the critical illness. (Some insurance companies have now reduced this to 14 days so please check before you buy.) So if the employee died before the end of the survival period, the claim would be invalid. In that context, it is not as comprehensive as full Keyman Insurance – but at around half the price of Keyman Insurance there has to be a little compromise!

Simon Burgess, the Managing Director of British Insurance says: “Group Critical Illness Insurance is a real alternative to full Keyman Insurance and at around half the cost, it’s great value for money. If business managers find Keyman Insurance too expensive there’s little excuse for not filling most of the gap with Group Critical Illness Insurance. Don’t pay the price for apathy”.

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On 4th April we alerted our readers to the apparent implications of the changes announced by the Chancellor in his latest budget.

By Thursday last week the estimates of the numbers of people that could be hit by the new anti-trust provisions in the recent budget hit 4.5 million. Then the following day the draft legislation for the Finance Bill was published - and the estimates fell to 1 million people.

So, with specific reference to life insurance policies written in trust, what’s happening?

Well first of all, we have to make the point that we are talking about the draft Finance Bill and it’s three months before that legislation will become law. It still has to pass through parliament and it’s possible that the situation could change. If it does we will keep you informed.

On Friday the Government retreated from its previous position that existing life policies written in trust will be caught by the new legislation. The position now is that if your life insurance policy was written in trust before budget day 2006, then the money in the trust remains totally free of tax and fees. That’s one headache out of the way.

However, if your policy was written in trust after the 2006 budget day, then the new rules do apply.

Gordon Brown’s latest budget has changed the tax rules on life insurance policies written in trust. Regular readers of our Blog will know that we have consistently reminded people taking out life insurance, that they should have their policy written in trust in order to avoid future Inheritance Tax (IHT).

The new rules introduced at the recent budget mean that even if your policy is written in trust and there is a claim on your policy, your estate will have to pay a tax charge of up to 6% on the value of the payout that comes above the IHT threshold of £285,00. This new rule applies from 5th April 2006.

Whilst this new tax is not to be welcomed, the new tax is only 6% which is still better than the 40% your estate would have to pay if your life insurance policy had not been written in trust. So, we believe that it is still worthwhile writing your life insurance policy in trust.
Having said that, there is now a danger that the tax charge of up to 6% could mean that there is insufficient IHT free cash generated by your policy to achieve your financial objective. If this is the case, don’t take any action just yet.

The Association of British Insurers (ABI) is meeting the Treasury this week to discuss the situation thrown up on life insurance policies by these tax changes. The insurance industry believes that the Government brought in the package of anti IHT avoidance measures, which included life insurance policies written in trust, without fully appreciating the impact on the man and woman in the street. Some commentators believe that the Government will back track and take life policies out of these anti trust measures. We’ll see!

Even if the new tax measures are not rescinded, existing life insurance policy holders should be aware of the transitional arrangements which will reduce their estate’s tax bill. The Treasury is saying that only the part of the policy that was in force after budget day will be caught in the IHT net. This means that if you have a 15 year policy for £100,000 and it has already been in force for 5 years, then only 66.6% of any payout would be subject to the new 6% tax – so in this example, your estate would have to pay tax of £3,999.96 if your estate, excluding the insurance payout, fully exceeded the IHT £285,000 threshold.

We will provide our readers with an update as soon as we hear the outcome of the ABI’s meeting with the Treasury this week.

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Gordon Brown’s latest budget has changed the tax rules on life insurance policies written in trust. Regular readers of our Blog will know that we have consistently reminded people taking out life insurance, that they should have their policy written in trust in order to avoid future Inheritance Tax (IHT).

The new rules introduced at the recent budget mean that even if your policy is written in trust and there is a claim on your policy, your estate will have to pay a tax charge of up to 6% on the value of the payout that comes above the IHT threshold of £285,00. This new rule applies from 5th April 2006.

Whilst this new tax is not to be welcomed, the new tax is only 6% which is still better than the 40% your estate would have to pay if your life insurance policy had not been written in trust. So, we believe that it is still worthwhile writing your life insurance policy in trust.

Having said that, there is now a danger that the tax charge of up to 6% could mean that there is insufficient IHT free cash generated by your policy to achieve your financial objective. If this is the case, don’t take any action just yet.

The Association of British Insurers (ABI) is meeting the Treasury this week to discuss the situation thrown up on life insurance policies by these tax changes. The insurance industry believes that the Government brought in the package of anti IHT avoidance measures, which included life insurance policies written in trust, without fully appreciating the impact on the man and woman in the street. Some commentators believe that the Government will back track and take life policies out of these anti trust measures. We’ll see!

Even if the new tax measures are not rescinded, existing life insurance policy holders should be aware of the transitional arrangements which will reduce their estate’s tax bill. The Treasury is saying that only the part of the policy that was in force after budget day will be caught in the IHT net. This means that if you have a 15 year policy for £100,000 and it has already been in force for 5 years, then only 66.6% of any payout would be subject to the new 6% tax – so in this example, your estate would have to pay tax of £3,999.96 if your estate, excluding the insurance payout, fully exceeded the IHT £285,000 threshold.

We will provide our readers with an update as soon as we hear the outcome of the ABI’s meeting with the Treasury this week.

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If you make a claim on a critical illness insurance policy your insurer will routinely make exhaustive enquiries about the history of your health. Whilst you’ll have provided them with lots of similar information when you first applied for the insurance, they’ll now insist that all the information is rechecked. And if you said you were not a smoker, they will also want this verified by your doctor.

The reason is clear. The insurer is faced with a big claim, typically well over £100,00, and they want to know that you told the full truth about your health when you applied. This means that now you’ve claimed, they’ll crawl through your medical records in great detail checking that you told them everything when you applied. Even the smallest and apparently insignificant detail will be subject to intense scrutiny. And this can be upsetting for you.

The insurers defend this process saying that they need to be sure that back when they accepted the business, the applicant told the full truth. They want to be sure that the applicant didn’t cheat by omitting some detail in order to dupe the insurer into issuing a policy when they otherwise wouldn’t have, or to qualify for a lower premium. Either way, omitting information would be cheating and grounds for refusing the claim.

The insurers are particularly suspicious if the claim arrives during the policy’s first five years. Any claim arising in this period is classified as an “early claim” and they’re particularly on the look out for any policyholders who took out the critical illness cover already suspecting that that they may be ill.

The problem is that this intense scrutiny attracts a very bad press. If you’ve just made a claim, you’re inevitably very sick and the last thing you want is lots of questions and high handed hassle from your insurer. There’s clearly a conflict here and the insurers need to work much harder at softening the presentation of the enquiry process and they must liase much more closely with their claimants. They must present a much softer centre.

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