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Critical Illness Insurance

Do you really need it, or is it a waste of time?

GREAT NEWS! There’s now a one in two chance of you winning the lottery before you retire.

Getting excited? – Think it’s just a matter of time before you win? Think again, it’s not going to happen – but it got you thinking!

Now think of the same odds but this time about the bad news. There is a 1 in 2 chance for men and women that they will be diagnosed with a critical illness during their lifetime. Sorry – this time it’s true.

Insurance cannot change those odds but it can alleviate the potential financial wreckage caused by being unable to work through long-term illness and still having a family and home to support.

Convention declares that every good family man should have life insurance. It’s easily understood, it’s accepted and your next-door neighbour has it too. But what about its close cousin critical illness insurance? You’ll have to walk several streets to find someone who has it. Given the odds, why? After all, it pays out a tax-free lump sum immediately an insured critical illness is diagnosed.

The usual reason given is its expense. Yes, it is more expensive than life insurance, but after all it’s providing cover for a greater risk. You’re much more likely to experience a critical illness than die before your normal retirement age. Indeed, the average age for a claim is 47. So clearly there is more to the public’s resistance. 

Not understanding the risks or “head in the sand syndrome” are certainly major factors. After all, Alzheimer’s disease, bacterial meningitis, brain tumours and leukaemia plus the long list of other illnesses typically covered by critical illness insurance, are not matters we want to think about.

Survival rates for critical illnesses are improving – which is great news – but life often changes dramatically after diagnosis. Not just emotionally, but financially too.

Mortgage payments, council tax, childcare costs, food, and utility bills are just some of the regular payments that still have to be made. There might even be extra things to pay for such as medication, or changes to the home. Sick pay from your employer might help, but only for a short period, and state benefits only offer a limited amount. Many people who are well enough to return to work can’t always work the same hours as before, so they could well experience a long-term drop in income. It would be nice to know there was a financial cushion to fall back on if this happened, to make life that little bit easier, and would mean you could concentrate on getting better. This is where critical illness cover can really help – even a little bit is better than none at all. It would give you some peace of mind that if the worst happened, you’d have some financial help.

So, what does this mean for contractors?

Contractors can now pay for their Life & Critical Illness Insurance through their limited company via a Relevant Critical Illness & Life Plan. This is classed as an allowable business expense, can be up to 50% cheaper than paying for the premiums personally, is not a benefit-in-kind or a P11D benefit, and the company can also claim Corporation Tax Relief on the premiums.

So, whether you are already paying for life & critical illness insurance out of taxed income, or you have not yet got around to putting vital life insurance in place, a Relevant Life Policy could be the most tax-efficient solution.

For more information, contact C&D: Business Protection Specialists on 0330 043 4321 (local rate) or request your free impartial quote here.

You will also be able to see how much you could save compared to a conventional plan on the link above.

By C&D Business Protection Specialists

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