INSURANCE - 11.05.2006

Covering every angle

It might happen to you

You already have adequate life insurance cover so if you did meet a premature end, at least your family will be taken care of. You also have a healthy pension fund so one day you’ll be able to retire and enjoy life the way you want. But what if something happened tomorrow? Say you fell victim to a nasty illness or went under the wheels of a bus? You might not be able to work for six months or more - how would you cover all the bills?

You are the business. As a key director in the company, in many respects you are the business - how would it function without you? Don’t expect much in the way of support from the government. So that really leaves you with insurance. Of course the premium is another cost but if you total up all your outgoings (if you have kids, would you want them to miss out?), the question then is whether you can afford not to take it out.

Tip 1. Before you commit yourself to insurance, sit down and work out how reliant you and your family really are on your income. Are there other sources available in the long-term?

Tip 2. Remember that if your company pays the premium it should get a tax deduction for it.

Which policy?

There are two basic types of cover - permanent health insurance (PHI) and accident, sickness and unemployment (ASU) cover. Both provide a monthly income in case you can’t work due to illness or injury. The amount of benefit payable is limited - normally a maximum of two-thirds of your provable income (though this varies from insurer to insurer).

Permanent health

Also known as income protection, this insurance normally runs until you retire. As long as the premiums are paid regularly, the insurer cannot cancel cover no matter how bad a risk you turn out to be. There is no limit to the number of times you can claim and benefits and premiums can be set to increase annually meaning you can keep pace with inflation.

Medical? You might be required to undergo a routine medical examination and HIV/Aids test. This is more likely the higher the level of benefit you require and if you’ve already disclosed some medical history that needs further consideration. In all cases you’ll be required to complete a detailed medical questionnaire before the insurance can start. You’ll also be asked for your consent for the insurer to write to your GP. Your sex and what you do for a living will also have a bearing on the premium you pay - an oil rig worker will obviously pay more than a sedentary office worker.

Tip. The longer you’re prepared to wait until the benefit starts, e.g. 13 weeks, the cheaper the premium will become.

Accident, sickness and unemployment

This is an annual contract that normally provides cover after one or two weeks off. It will usually only pay a benefit for a maximum of 104 weeks. It works in much the same way as any other annual contract, e.g. motor insurance. This means there’s always a risk that if you claim you might find the premium increased on renewal. However, it provides peace of mind that you’ll quickly have a source of income, albeit for a finite period of time.