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.

Tags: critical illness, critical illness cover, critical illness insurance

This entry was posted on Friday, November 21st, 2008 at 3:12 pm and is filed under Critical Illness. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.