This type of plan is designed to pay out a lump sum payment if the individual named on the policy schedule is diagnosed with one of a range of defined critical illnesses or disabilities, or both, for example heart attack, cancer or stroke.
Once this payment is made or the policy reaches the end of the term specified the policy finishes.
The term of the plan is decided at outset, as is the level of cover. The cover may be on a level or decreasing basis. If on a decreasing basis the death benefit will decrease by a specified percentage each year, and in the last years of the policy the cover will be negligible.
As an allowance for decreasing at outset the premiums are the same throughout the policy but are cheaper than level term assurance.
Please remember that premium payments should be maintained or the benefits of the policy may be put at risk.
The policy will not have a surrender value at any time.
Taxation and Trusts
The benefit received from this policy may be subject to Inheritance Tax. It is possible to write your policy in trust to ensure that the benefits are paid to your dependant(s) or beneficiary without delay and take the policy outside your ‘estate’ for Inheritance Tax purposes. This means that the proceeds of the policy should pass to the beneficiaries named in the trust documentation. The Trustees appointed by you will be responsible for carrying out your wishes.
Please remember that any trustee(s) appointed would have responsibilities that must be met. Therefore you should ensure that the individual(s) concerned are prepared to undertake the role and are fully aware of their responsibilities. If you require further information about writing your policy in Trust or would like us to help explain the responsibilities to any Trustees then please let us know.
Waiver of Premium Benefit
Is a small insurance cost that may be added to your premium. This means that if you are ill or have an accident and are unable to work, the insurance company will pay your premiums (after a set ‘waiting period’) until the earlier of your return to work: the policy expiry date or your death whichever happens first.
Terminal Illness Benefit
Is often offered without charge. If it is available it will say so on your policy schedule. In the event that you are diagnosed with a terminal illness and unlikely to live for 12 months any death benefit will be paid early.
For more information on how we act on behalf of our clients, our payment structures and terms please read our Retail Client Agreement (here).