Leon, (50) a shipping manager, has just married Emma (45) who has an 18 year-old daughter, Joanne.
Emma is a dinner lady, and Joanne a trainee chef, both have no personal health or protection cover at all. Leon earns £45,000 a year which includes a corporate PMI policy, and also has personal life, critical illness and income protection policies initiated when he took out his mortgage which is still active. He would like to add both Emma and Joanne to his life and critical illness and IP cover. What should he consider?
Peter Lurie, Proactive Medical & Life Insurance
As Leon has a corporate PMI policy it would be wise for him to check if he can add both Emma and Joanne onto his corporate PMI scheme, generally these plans are worked as group schemes making any future additions to the plans very economical.
Leon currently has full protection; however, his plans should be reviewed. The plans may not suit his needs as his circumstances may have changed.
Both Emma and Joanne work in the catering industry and therefore would be best served with an economical short term income protection policy or Accident and Sickness plan each.
Their budget should probably be a consideration, the average annual salaries of both a dinner lady and a trainee chef could fall between 12 and 15K, and therefore a policy which in turn does not affect their outgoings but covers the basics may suffice. Working within the catering industry could also have a certain risk element attached.
Emma should consider a life protection plan for her husband and daughter; however this would again be dependent on her budget and would be put in place to relieve any stress through bereavement if the worst were to happen. A critical illness policy may work out to be too expensive at her age.
However a joint policy could be reviewed when looking at Leon’s own cover, and again separate critical illness cover for Joanne. Her life protection should be considered when she takes on future responsibility.
Jennifer Gilchrist, Scottish Provident
Leon has sensibly recognised that his new wife needs to have access to his current protection cover. It would also be sensible for them to provide protection for Emma by either setting up a new policy or adding her as a life assured under Leon’s existing policies.
Both new and existing policies should be written under split trusts to allow access to critical illness and income protection benefits but gifting the death cover. This will allow easy access to the benefits and also protect the family from unwanted inheritance tax bills on death. Now would also be ideal for Leon and Emma to either review their existing wills or have wills written.
Given that Leon has recently married, he should review his existing cover. This may lead to him increasing the cover under his existing policies unless they already contained inflation proofing which has protected the buying power of the sums he has insured. Leon should also review the options under his existing cover to see if he can use any guaranteed increase options.
Leon should investigate the possibility of adding Emma and Joanne to his corporate PMI policy which may be available to him at favourable premium rates.
In addition, Joanne should take out protection cover as she has an immediate need for income protection for sickness or illness. If she takes out a menu product she would be able to add new benefits when for example she buys her own home and needs life and critical illness cover.
Aiden Dewhurst, Progress from Royal Liver
It’s good that Leon currently has a mix of life, critical illness (CI) and income protection (IP) because each product protects his finances in different ways. Of course, now that he has his new family his priorities have changed.
If his policy was with Progress, he would be able to increase his life and CI benefits by as much as £100,000 and his IP by an additional £10,000 per year, without the need for additional underwriting. We include these General Insurability Options with all our plans to allow individuals to increase their cover when they undergo significant life events like marriage.
Without any existing financial protection, Emma and Joanne should be looking to set up some cover as soon as possible. With Progress they could do this on the same plan (with one plan fee) if they prefer, but the advantage of establishing two separate plans is that the cover can evolve in different directions. So when they both enter different life stages, their cover can adapt accordingly.
When it comes to product mix, Joanne has no dependants and would see more relevance in IP and CI, whereas Emma’s priorities may lead her to look more at life or Family Income cover.
But whatever they decide, assuming they have no major health issues, both mother and daughter could be fully protected in a matter of minutes. Their respective occupations would be charged at standard rates with no need for an underwriting referral.
