Jun 10 2020

Financial planning is not only about fulfilling our needs and aspirations, but it is also about protecting those dearest to us, and those financially dependent upon us.

Of course, illnesses and deaths are not things that we like to think about, but failing to protect against such eventualities can have severe consequences for our loved ones, from struggling to pay the mortgage to a potential Inheritance Tax bill.

If you are diagnosed with a critical illness, it can have a severe impact on your finances, as you may need to take time off work for your treatment and recovery.

Critical illness cover differs from income protection insurance because instead of receiving a regular pay out to replace any loss of income, you will usually get a tax-free lump sum if you’re diagnosed with, or undergo surgery for, a specified critical illness that meets the policy definition.

Critical illness cover might be sold alongside financial products like mortgages, but you do not legally need to buy a policy.

However, it can provide peace of mind that you will receive some financial help to support you and your family financially should you ever fall seriously ill, giving you one less thing to worry about.

Critical conditions can include suffering a heart attack, stroke and certain types of cancer – but each policy will have its own definitive list and the definition of critical illness, and the conditions covered will vary greatly depending on the policy. It is important to understand exactly what a policy covers before you agree to the terms.

For example, some policies will not include certain types of cancer as they are considered by some insurers to be easily treatable. An independent financial adviser can explore all of your options for you, searching the whole of the market to find the policy that’s right for your specific needs and requirements.

While the proceeds of a critical illness policy won’t usually attract income or capital gains tax, it will form part of your estate and may therefore be subject to Inheritance Tax. Putting an insurance policy into trust at the outset means the proceeds will be paid directly to your chosen beneficiaries in the event of your death, rather than to your legal estate, and will not be taken into account when Inheritance Tax is calculated.

You may already have protection plans in place but it is worth reviewing them as your circumstances may have changed, your priorities shifted or there may be unnoticed gaps that can be bridged.

A Fairstone financial planner can provide you with independent financial insurance advice and help you find the products to protect your specific needs and circumstances.

Not all critical illness plans work in the same way, for example some types of cancer may not be included and some plans may offer reviewable or guaranteed premiums. All plans are subject to medical underwriting limits and acceptance of your application is not guaranteed. Critical illness plans are not intended to be savings or investment products and as such usually do not have a cash in value unless a valid claim is made. Please refer to all Key Facts documents and important product information before you apply.

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For further information, please contact:
Andrea Barker
/ Tel. +44 (0) 191 519 6243