Critical Illness Reviewer

Temporary critical illness insurance annuities have a variety of uses. They, too, are found in single-premium investment packages, but may also profitably be used by individuals in some circumstances. They are payable for a fixed term or until the earlier death of the annuitant. The usual use is to “fund” some liability for regular payments using a capital sum. Thus, an invest­ment of a sum in temporary annuity can produce a regular income for 9 years which can be used to pay the premiums on a qualifying critical illness insurance policy.

The capital, at the end of 10 years, has been converted from a taxable investment into a tax-free one within the confines of a critical illness insurance policy. This type of exercise is particularly attractive to those with capital and high income tax liabilities. As mentioned above earlier, annuities are deemed to consist of elements of both interest and capital. The amount of tax­ free capital in each annual payment (which is not liable to tax) was fixed in 1956 at a rate depending on age and sex.

If an annuitant is liable to income tax he will be asked to complete an Inland Revenue form PLAl. Provided that the annuity conforms with the rules the critical illness insurance company will be permitted to deduct income tax at the basic rate on the interest content only. Until the completed form is returned to the company, it is, however, required to deduct tax at the basic rate on the whole of the annuity. The annuitant must account separately to the Inland Revenue for any higher-rate tax or investment income surcharge which may be due on the interest content. If the annuitant’s income (including the interest content of the annuity) is so low that he or she will not be liable to income tax, application may be made through Inland Revenue form R87 for the company to pay without deduc­tion of tax.

It is therefore towards one’s advantage to purchase critical illness insurance for a more secured and well bolstered forthcoming.

Specific surveys in the UK may demonstrate that around a quarter of the whole population may suffer from a critical illness prior to becoming of retirement age. In case that you are the sole income earner at home and shoulder familial responsibilities you have no other alternatives than to quit your work. Then what would happen to your family? Would they have enough money to pay for your treatment and at the same time run the house? From my own opinion that would be a harsh task, set especially for your wife. At such times, critical illness cover may provide you with enough peace of mind that your treatment would be done and your family would be rightly taken care of.

However, choosing the right critical illness policy may take you some time. There may be a growing number of insurance companies over the market nowadays. Due to this, anyone would find it tricky to unlock the best deal. Making some research on the internet can be considered as one of the easiest means to get a suitable critical illness policy. There may numerous insurance related web sites that are ready to provide you with free quotes. Comparing these quotes may give you a better idea about the variation of critical illness cover from one company to other. At the same time you may also be able to buy a critical illness cover at a cheap rate.

Moreover, one problem may have cropped concerning the critical illness conditions covered. The definitions of these critical illnesses may vary from company to company. For instance, some companies may require two arteries to be operated for a critical illness like coronary artery bypass. On the other hand, others may only require only one artery to be operated. Therefore, it may be imperative that you read your whole critical illness policy attentively. The less complicated the critical illness policy, the better it may be for you when you make a claim. Simple mistakes at the time of making an agreement may restrain you from having a successful payout.

The choice of company for a with­profit critical illness insurance policy is a good deal more important than in the case of different or other less reputed forms of critical illness insurance plans. Historical results show that, over a 25-year term, maturity values of with-profit critical illness insurance policies have varied by as much as 35%. A man aged 39 in 1952 paying £10 a month over 25 years could have received as much as £7,300 or as little as £4,800 in 1977 at maturity of a 25-year with-profit plan.

Many people are puzzled and even dismayed by this sort of disparity. It arises as a result of two main factors, both of which are worth looking at more closely to better understand certain concepts. The prime determinant of the amount you receive at the maturity of a with-profit critical illness insurance policy is the skill of the investment managers of the insurance company you have chosen. It is their job, in conjunction with the company’s actuaries, to maximize the return from the investment of funds for the benefit of policyholders. In doing so they must take account of the likely pattern of future claims so that there is always ready money to meet them without having to sell off invest­ments at an unpropitious time.

Besides, they must also assess the current prospects for the major investment sectors into which they put money: shares, fixed-interest investments and property. If they put too much into one sector which then fares badly compared with the others, the returns to the critical illness insurance policyholders will be lower than they might have been. On the other hand, they are dealing with very large sums of money - often tens or hundreds of millions of pounds - and they cannot simply liquidate all their property assets or shareholdings, even if they wanted to. To a large extent they are “locked in” to substantial shareholdings and property investments, and their normal practice is to make investment decisions on a long-term basis, not with the aim of taking a quick profit.