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Personal protection The lifestyle enjoyed by you and your family is doubtless one you hope will continue. But illness or accident can strike anyone at any time. If you, your partner or your carer were to become seriously ill or die, what would happen to the family left behind? Who would pay the mortgage and bills? Although mortality is not something we like to think about, 1 in 8 men and 1 in 12 women die before the age of 65. Double that figure contract a critical illness. Fortunately, there is a lot you can do to safeguard your family's situation in the event of illness, accident or death. A number of products exist which help to do so.
Initial considerations If you have a disability, there are a number of things you need to bear in mind before applying for any kind of health-related insurance policy. The first thing to recognise is that many insurers WILL NOT UNDERWRITE APPLICATIONS MADE BY THOSE WITH A PRE-EXISTING MEDICAL CONDITION. If they do, then they will usually not pay out in the event of illness or accidents caused by that disability. What normally happens when applying for life or health insurance is you will be asked a series of questions regarding - among other things - your health. When an insurance company has a good picture of your personal circumstances, they will send your application to be underwritten. If the underwriters are uncertain whether to insure you, they may ask for further details: they might ask you to take a medical for example, or they may ask for the results of any medical tests results you have taken. At all stages of the process you should be honest with information. Holding back details could cause problems in the future. The most important yardstick by which to decide whether you need life assurance is if you have people who depend on you financially. If you do, then you need life assurance. To decide how much you need, you should work out present family outgoings on one hand. Then work out how much income there would be if you or your partner were to die. If there is a shortfall between potential family income and outgoings, then you will need life assurance. When working out your income, take into account money from pension schemes and any other form of life cover given by your employer. Also remember to include income from savings and state benefits. If there is a shortfall between potential family income and outgoings, then you will need life assurance.
What you give and what you get
This depends upon the type of policy, but with Term Assurance you pay the premium for a specific term and if you die before the policy's expiry date, the policy pays out the amount you're covered for. There is no investment element and you receive nothing back if you survive. The monthly cost for a policy will depend upon your age, your health and the term of the policy. Cover is often taken out for 20 or 25 year periods. If assurance is taken out at a younger age, premiums are lower. Types of life assurance
Things to bear in mind
This type of insurance pays out a bulk sum if you develop one of a list of serious illnesses or have a specific type of surgery. The list will vary with each provider, but there are seven main conditions that all providers provide for: heart attack, coronary artery bypass, stroke, major organ transplant, cancer, multiple sclerosis and kidney failure.
What you give and what you get
You will be granted a lump sum payment which can still be made even if you return to work. Your monthly personal premium will depend on the size of the payment you want, on your age, sex, vocation and type of policy. Sometimes critical illness cover is combined with life assurance. You can usually choose between either a fixed term policy (20 years for example) or lifelong cover. If you were to become ill, you could use the lump sum to:
These policies are similar to critical illness policies. They pay out a lump sum in certain circumstances. Personal accident insurance can be used to ensure that hospital costs both as an inpatient and outpatient are paid. The money will also help cover the loss of earnings if you are unable to work for a long period.
Things to bear in mind
Many providers have some kind of 'existing medical clause' that might restrict your ability to secure critical illness insurance or personal accident insurance. Talk through what this means with your provider before making any firm decision. In some circumstances, for example, you might be seriously compromised in your ability to make a claim unless it was clearly nothing to do with your disability.
Also known as income replacement plans, these policies are designed to protect your standard of living if you suffer from long-term illness or injury and cannot work as a result. Check which illnesses are covered, for there are usually some exceptions. This kind of insurance pays out if:
What you give and what you get
Permanent health insurance pays out a regular income to the policy holder until the age of 60 or 65, or until you are well enough to return to work. Some insurers offer a carer's option with this, which is a regular sum that can be used to pay for childcare (or your care) if you are unable to look after your children (or yourself) because of illness. The cost of monthly contributions will depend on your job, age, sex and when you want the payments to start. Often there are considerably lower premiums of you can afford to defer payment for 13 or 26 weeks after your accident or illness. A long deferment period may be the sensible option if your employer is paying full salary (under paid sick leave) during the deferment period. If not, you may want to use some of your savings to tide you over. Remember also that you may well be eligible either for Statutory Sick Pay (SSP) from your employer if you are not receiving any salary, or Incapacity Benefit from the state if you cannot claim SSP.
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