Whether you are looking at corporate protection as a company director, critical illness cover as a sole trader or private medical insurance for you and your family, the protection planning landscape is constantly evolving.
Protection planning is very much based on the idea of what “could” happen, which is why many people deem it unnecessary. It’s human nature to avoid thinking about the worst-case scenario, however, underestimating the importance of protection planning means taking major risks that could leave you and your family in jeopardy in the case of any adverse situation, such as long-term incapacity or sudden death.
The fear of uncertainty is real, but the future is notoriously hard to predict which is why it is vital that you are prepared for whatever life throws at you and put cover in place to minimise the impact. It’s also important to review your policies on a regular basis to ensure that you are getting the most out of them.
Diversify Your Protection Portfolio
Many of our individual clients benefit from a diversified protection portfolio where all the components combine to create effective protection arrangements across the board. This may include Life Cover, Private Medical Insurance, Mortgage Payment Protection, Income Protection Insurance and Critical Illness Cover.
Within each protection policy, every individual can choose the level of cover that they wish to take out. A professional will advise on the most effective type of cover which may depend on factors such as your marital status, age, and occupation, while health-related insurance cover may also consider your smoker status, occupation and state of health at the time of taking out your policy as well as your claims history.
Private Medical Insurance
With regards to private medical insurance, we usually advise that this type of cover be taken out earlier in your lifetime when you are least likely to have developed pre-existing conditions. You will also have more time to build up a no-claims bonus and increase the opportunity of negotiating lower renewal premiums.
This type of insurance will typically cover the costs of treatment for short term illnesses and injuries with policies focused on any key needs and priorities. Other options (depending on your policy) may include selection of hospitals for treatment, psychiatric cover and dental cover.
Make Time for Regular Reviews
If you already have a protection plan in place that haven’t reviewed in months or even years, you may not understand the importance of maintenance. But once you have set up your protection policy, that’s only the first step. You need to set regular appointments for an expert to review your policy and make any necessary or beneficial changes.
Routine reviews will make sure that your protection policy is updated to cover your most important needs in the most cost-effective way in line with current industry regulations. A review will also make sure that your plan is framed for optimal benefits and returns, as well as assess your protection, investments and pension plans for whether they are using the most appropriate tax wrapper to deliver maximum tax efficiency.
Just the slightest tweak could result in tax savings on your part which is why it’s well worth taking a bit of time out to speak to an independent financial adviser and identify any gaps that could be filled – or improvements that could be made – to your policy.
Making changes
Regular reviews will verify that your protection plan is up to date – for example, you may have a larger mortgage than when you first took out the policy. Perhaps you have had more children or inflation has eroded the value of the cover you previously took out?
An expert adviser will help you to make changes to fit your lifestyle, for example – by adding or removing policy members and adapting your cover to help your family maintain higher mortgage payments in the event of accident, illness, death or inability to work and maintain a regular income.
Marriage or divorce may also necessitate protection policy changes in order to account for key issues, such as setting up the situation for minimum Inheritance Tax payments or accounting for any children involved in the case of the death of one or both parents.
Where children from a previous marriage are involved, the protection needs of each individual may also vary. Protection policies may also need to be updated to account for the interests of vulnerable beneficiaries, while new couples may also need to consider whether they wish to set up a joint life cover or two single life covers.
The Relevant Life Plan
Aside from the more traditional protection policies that we have outlined above, another of the most attractive forms of cover is the Relevant Life Plan. This provides a tax-efficient alternative to the “death in service” benefit and a valuable opportunity for high earners and individuals that are considered key people in their organisation.
In most situations, your company may be able to provide and pay for the life cover without creating a P11D benefit whilst obtaining a corporation tax deduction.
As an employee, you may be able to save up to 50% on tax via a Relevant Life Plan when compared with paying for life insurance through an ordinary life policy. The business pays the premium and you will not need to pay national insurance or tax in addition, making it a more affordable choice of cover. It is also a business expense which should receive a deduction against corporation tax.
For advice on any aspect or protection planning and access to a range of protection policies, contact Vintage Wealth Management on 020 8371 3111 or email info@vintagewealth.co.uk .. For queries relating to private medical insurance, please contact Vintage Health on 020 8371 5240 or email: info@vintagehealth.co.uk
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