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If
you were to die prematurely, what impact would this
have on your family? Would they still be able to realise
their plans and goals without you being around? And
how would you cope financially if you became too ill
to work due to an illness or disability? Take some
time out and consider the following:
Permanent
Health Insurance (PHI)
For
most of us, our income funds everything. If it ceases,
everything else stops, so how do you ensure its continuation?
The answer is PHI, also now known as Income Protection
Insurance. This is a form of protection that pays
out a regular amount if you are unable to work because
of sickness, accident or disability.
PHI
can replace a percentage of your income, less any
state benefits and cover provided by your employer.
The payments are paid tax-free and commence after
a period that you specify. You can also decide whether,
in the event of a claim, you require the benefit payment
to remain level or to escalate annually.
1
in 14 of the workforce have been off work for six
months or longer due to sickness, accidents and disability.
(Source: Department of Social Security 2002)
Critical
Illness Protection
Critical
illness protection is an insurance that pays out on
the diagnosis of certain specified critical illnesses.
The illnesses covered vary from policy to policy,
but they usually include six core conditions: cancer,
heart attack/coronary bypass surgery, kidney failure,
major organ transplant, multiple sclerosis and stroke.
Generally within 14 days of a specified illness being
diagnosed (although this does vary depending on the
particular provider), you would receive a tax-free
lump sum payment.
The
financial consequences of not having critical illness
protection could be significant. Calculate the size
of your outstanding mortgage, liabilities and other
financial commitments. Would you be in a position
to repay them if you were diagnosed as suffering from
a critical illness, or do you have a shortfall?
Life
Assurance Protection
It's
not a particularly pleasant thought planning for your
premature death. However, if you have dependants,
it's essential. Life assurance is designed to do one
of two things: replace lost income for dependants
or provide a capital sum to repay liabilities. So
what are some of your options?
Term
assurance policies guarantee to cover you over a fixed
term, specified at the outset. Decreasing term assurance
is usually used in connection with a repayment mortgage.
Family income cover pays out as a regular income,
which is continued through until the end of the term.
Whole of life assurance guarantees to pay out a lump
sum on your death whenever this occurs. This type of life assurance can also be used as a vehicle
to plan for inheritance tax mitigation.
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