Notes on Company Wealth Protection Insurance Plans
Key Person
Key person assurance is used to address the fact that although many businesses fully insure their material assets, often the ‘human assets’ are overlooked. ACME LTD are fully aware of this, and require the three key individuals of the company to be insured for the specified amounts. Should the unfortunate happen the proceeds could be used for many things, among them replacement costs, such as headhunting fees, salary for a replacement person, business interruption costs as projects may be delayed or existing contracts/contacts lost, or other financial implications such as falling profits, or cancelled loan agreements (if appropriate). We recommend you review the level of cover provided regularly as the business continues to grow.
All costs will be borne by ACME LTD and the plans are written for a 5-year term. This should also ensure that should you wish them to, HMRC will allow the premiums as an allowable deduction for Corporation Tax purposes, however we also recommend you carefully consider the potential taxation of key person policies. I can confirm that once the plans are in force you should send a letter to send to your local HM Inspector of Taxes to obtain clarification. I can provide a specimen letter if required.
In summary, Key person policies are paid by the company, for the benefit of the company.
Shareholder
The death or critical illness of a shareholder can often halt a business in its tracks because of the need to rearrange the shareholding. Problems may arise if the family of a deceased shareholder do not agree with the way the others are running the business or if a shareholder who is critically ill is no longer able to contribute to the business but still wishes to have a say and reap financial rewards thus holding the company back. In order to mitigate these problems (and others) and to enable swift action to be taken I recommend that the shareholders protect their interests in the business. We discussed the implications of individual shareholders dying or being diagnosed with a critical illness.
If any of you were to die or be unable to work through critical illness the situation would be difficult. It was agreed that the other partners should have the funds available to purchase the shareholding. This way the shares would stay in the same hands and the other party would have funds to deal with the situation as they wish. So for example, if Person A were to die, funds would be available for Person B and Person C to purchase the shares, keeping the shares in the control of those still running the company and providing Person A’s family with money to use as they wish.
The shareholder cover was based on the value of ACME LTD at XX date. I recommend that you review this amount of cover as the business grows to ensure that the cover reflects the market value of the business. Although ACME LTD will pay the premiums they will be treated as a ‘P11d’ style benefit and taxed accordingly. You should ensure that your accountant is aware of this and deals with the premiums appropriately. As you may have differing premiums you may wish to ‘equalise’ the costs, thus ensuring equal taxable benefit for each of you.
In summary, Shareholder protection provides benefits for individuals or their families, in exchange for the value of shares
Please note this is just intended to be a very basic guide.
There is more information in my downloadable guide http://www.iangreen.com/downloads/Bus_si.pdf
but please do seek professional advice before arranging these types of contracts
Tuesday, 8 November 2011
Wednesday, 2 November 2011
16 years as a Financial Adviser
Hallowe'en 2011 was the 16th anniversary of my being a licensed financial adviser.
To celebrate, I sent a small 'trick or treat' token of my appreciation to my clients.
Here is how it happened...
Hundreds of packets of sweets were placed into small gift boxes or readied for insertion into envelopes
I pride myself on a personalised service so I wrote the salutation and personally signed all the client letters before folding into the protective envelopes.
For some strange reason the blog software wants me to rotate...?
Rest assured, I didn't have to carry the bags matrix style running along the wall, although there were a few bags and a few trips.
When the last post bags had left, it was recycling time. All the packaging was recycled. As to the mailing, the vast majority of the envelopes were made from recycled or sustainably sourced stock, the plastic boxes were UK made and designed as a client gift to be reused.
To celebrate, I sent a small 'trick or treat' token of my appreciation to my clients.
Here is how it happened...
Placing the mini chocolate pumpkins, without squashing them (squash - geddit!?) with the happy halloween label facing up' into the gift boxes took the longest...
I pride myself on a personalised service so I wrote the salutation and personally signed all the client letters before folding into the protective envelopes.
 |
| Office floor space was at a premium as the mailing progressed...! |
Rest assured, I didn't have to carry the bags matrix style running along the wall, although there were a few bags and a few trips.
Green by Name...
When the last post bags had left, it was recycling time. All the packaging was recycled. As to the mailing, the vast majority of the envelopes were made from recycled or sustainably sourced stock, the plastic boxes were UK made and designed as a client gift to be reused.THANK YOU
The aim of the event was to say a big THANK YOU to clients, a number of whom have been clients since my first year, sixteen years ago. As a small business I never take anyone's patronage for granted and I truly appreciate the trust clients place in me to assist in their financial planning and when recommending my services to a friend, family member or colleague.
Beware Greeks Rejecting Gifts
Time for another update on market movements and happenings.
Those clients that I have met face to face with recently will be aware that my general thoughts on imminent future market movements are that we are unlikely to see major upwards gains in the markets in general in the near and medium future but that during that time I expect high volatility – ie lots of ups and downs.
This is good for those saving regularly as it enables the effect of ‘pound cost averaging’ to take effect - see http://greenfinancial.blogspot.com/2011/02/pound-cost-averaging.html
However for those already invested it probably represents more of a roller coaster ride.
Do remember, that the lower risk (or volatility) portfolio content you have, the lower the exposure you have to equities and the markets, so the lesser effect any drops (or rises) have on your investments.
For those in the lower numbered portfolios it is actually more like just a bumpy road than a roller coaster!
As ever, if you have any concerns, please do contact me.
Onto the commentary…
Just when the situation in the Eurozone appeared to be moving in the right direction with the agreement last week (has anyone else noticed every time I leave the country markets seem to rise…? Perhaps I should operate from abroad?) on a further bailout package and a voluntary 50% haircut on Greek sovereign debt, we had the unexpected announcement this week that the Greek government has decided to hold a referendum on the latest euro-zone package, probably in December or January.
In reality, the Greek government is simply trying to foster public support as it provides the Greek population with the decision between continuing austerity and membership of the single currency. Some might call it a gamble.
Data from opinion polls suggest that although 60% are opposed to the new Eurozone package (and continuing austerity), approximately 70% want to remain in the Euro. And let’s be clear about it… if Greece want to remain in the single currency then it will have to take the medicine prescribed by the Eurozone governments (primarily Germany and France). The alternative is for Greece to leave the Euro but this route is not (publically at least) on the table for Greece or the other sixteen members of the Eurozone.
I felt that the global market reaction to last Thursday’s announcement was overdone (again) as we had only seen headlines from the Eurozone governments with little detail on how these packages and targets would be achieved. Certainty is a crucial factor for global investment markets and the re-emergence of uncertainty has led to the significant falls in global equity markets yesterday and today (writing at 9:30 am Weds).
As I have said in the past, in my role as Advisor / Manager of your portfolio(s), part of my job is to read, research, analyse and assimilate as much information as possible to inform and then blend the asset allocation models and investment strategy. It is far from a rosy picture for the global economy at present but, as I have stated in the past, ‘investors’ or ‘the markets’ do have a tendency to overreact to “news”, either on the upside or downside, and I believe that this is the case today. Investor sentiment, rather than economic data is the key driver of global investment markets in the very short term.
Although it is far from easy, I continue to believe that patience is important, ultimately economic fundamentals will win out and the vast majority of clients should remain invested in line with the diversified Model Portfolios.
As I say at the outset of this post, I expect an extended period of volatility in global investment markets – and this will no doubt be magnified in the run up to the proposed Greek referendum, and I will continue my regular dialogue to ensure that client portfolios are positioned to meet the dual mandate of creating and preserving wealth based upon our your attitude to risk and volatility.
Those clients that I have met face to face with recently will be aware that my general thoughts on imminent future market movements are that we are unlikely to see major upwards gains in the markets in general in the near and medium future but that during that time I expect high volatility – ie lots of ups and downs.
This is good for those saving regularly as it enables the effect of ‘pound cost averaging’ to take effect - see http://greenfinancial.blogspot.com/2011/02/pound-cost-averaging.html
However for those already invested it probably represents more of a roller coaster ride.
Do remember, that the lower risk (or volatility) portfolio content you have, the lower the exposure you have to equities and the markets, so the lesser effect any drops (or rises) have on your investments.
For those in the lower numbered portfolios it is actually more like just a bumpy road than a roller coaster!
As ever, if you have any concerns, please do contact me.
Onto the commentary…
Just when the situation in the Eurozone appeared to be moving in the right direction with the agreement last week (has anyone else noticed every time I leave the country markets seem to rise…? Perhaps I should operate from abroad?) on a further bailout package and a voluntary 50% haircut on Greek sovereign debt, we had the unexpected announcement this week that the Greek government has decided to hold a referendum on the latest euro-zone package, probably in December or January.
In reality, the Greek government is simply trying to foster public support as it provides the Greek population with the decision between continuing austerity and membership of the single currency. Some might call it a gamble.
Data from opinion polls suggest that although 60% are opposed to the new Eurozone package (and continuing austerity), approximately 70% want to remain in the Euro. And let’s be clear about it… if Greece want to remain in the single currency then it will have to take the medicine prescribed by the Eurozone governments (primarily Germany and France). The alternative is for Greece to leave the Euro but this route is not (publically at least) on the table for Greece or the other sixteen members of the Eurozone.
I felt that the global market reaction to last Thursday’s announcement was overdone (again) as we had only seen headlines from the Eurozone governments with little detail on how these packages and targets would be achieved. Certainty is a crucial factor for global investment markets and the re-emergence of uncertainty has led to the significant falls in global equity markets yesterday and today (writing at 9:30 am Weds).
As I have said in the past, in my role as Advisor / Manager of your portfolio(s), part of my job is to read, research, analyse and assimilate as much information as possible to inform and then blend the asset allocation models and investment strategy. It is far from a rosy picture for the global economy at present but, as I have stated in the past, ‘investors’ or ‘the markets’ do have a tendency to overreact to “news”, either on the upside or downside, and I believe that this is the case today. Investor sentiment, rather than economic data is the key driver of global investment markets in the very short term.
Although it is far from easy, I continue to believe that patience is important, ultimately economic fundamentals will win out and the vast majority of clients should remain invested in line with the diversified Model Portfolios.
As I say at the outset of this post, I expect an extended period of volatility in global investment markets – and this will no doubt be magnified in the run up to the proposed Greek referendum, and I will continue my regular dialogue to ensure that client portfolios are positioned to meet the dual mandate of creating and preserving wealth based upon our your attitude to risk and volatility.
Thursday, 20 October 2011
The Jar of Priorities
I remember hearing this story at a conference in February 2000, a few months before my first child was due to be born. It resonated with me then and the story was recently told to me again. It is always worth repeating...
When things in your life seem almost too much to handle, when 24 hours in a day are not enough, remember the mayonnaise jar……..and the beer
A professor stood before his philosophy class and had some items in front of him. When the class began, wordlessly, he picked up a very large and empty mayonnaise jar and proceeded to fill it with golf balls.
He then asked the students if the jar was full. They agreed that it was.
So the professor then picked up a box of pebbles and poured them into the jar. He shook the jar lightly. The pebbles rolled into the open areas between golf balls. He then asked the students again if the jar was full. They agreed it was.
The professor next picked up a box of sand and poured it into the jar. Of course, the sand filled up everything else. He asked once more if the jar was full. The students responded with a unanimous “yes.”
The professor then produced two cans of beer from under the table and poured the entire contents into the jar, effectively filling the empty space between the sand. The students laughed. “Now,” said the professor, as the laughter subsided, “I want you to recognize that this jar represents your life. The golf balls are the important things–your family, your children, your health, your friends, your favorite passions–things that if everything else was lost and only they remained, your life would still be full.”
“The pebbles are the other things that matter like your job, your house, your car. The sand is everything else–the small stuff.”
“If you put the sand into the jar first,” he continued, “there is no room for the pebbles or the golf balls. The same goes for life. If you spend all your time and energy on the small stuff, you will never have room for the things that are important to you. Pay attention to the things that are critical to your happiness. Play with your children. Take time to get medical checkups. Take your partner out to dinner. Play another 18. There will always be time to clean the house, and fix the disposal. “Take care of the golf balls first, the things that really matter. Set your priorities. The rest is just sand.”
One of the students raised her hand and inquired what the beer represented.
The professor smiled. “I’m glad you asked. It just goes to show you that no matter how full your life may seem, there’s always room for a couple of beers.”
When things in your life seem almost too much to handle, when 24 hours in a day are not enough, remember the mayonnaise jar……..and the beer
A professor stood before his philosophy class and had some items in front of him. When the class began, wordlessly, he picked up a very large and empty mayonnaise jar and proceeded to fill it with golf balls.
He then asked the students if the jar was full. They agreed that it was.
So the professor then picked up a box of pebbles and poured them into the jar. He shook the jar lightly. The pebbles rolled into the open areas between golf balls. He then asked the students again if the jar was full. They agreed it was.
The professor next picked up a box of sand and poured it into the jar. Of course, the sand filled up everything else. He asked once more if the jar was full. The students responded with a unanimous “yes.”
The professor then produced two cans of beer from under the table and poured the entire contents into the jar, effectively filling the empty space between the sand. The students laughed. “Now,” said the professor, as the laughter subsided, “I want you to recognize that this jar represents your life. The golf balls are the important things–your family, your children, your health, your friends, your favorite passions–things that if everything else was lost and only they remained, your life would still be full.”
“The pebbles are the other things that matter like your job, your house, your car. The sand is everything else–the small stuff.”
“If you put the sand into the jar first,” he continued, “there is no room for the pebbles or the golf balls. The same goes for life. If you spend all your time and energy on the small stuff, you will never have room for the things that are important to you. Pay attention to the things that are critical to your happiness. Play with your children. Take time to get medical checkups. Take your partner out to dinner. Play another 18. There will always be time to clean the house, and fix the disposal. “Take care of the golf balls first, the things that really matter. Set your priorities. The rest is just sand.”
One of the students raised her hand and inquired what the beer represented.
The professor smiled. “I’m glad you asked. It just goes to show you that no matter how full your life may seem, there’s always room for a couple of beers.”
Friday, 7 October 2011
NEST Update- for employERs
Starting now, October 2012, ALL employers will have to make compulsory pension provision for their employees
But before you panic, don’t worry. This is being phased in over four years. This process is known as ’staging’
At its simplest, the bigger the company, the earlier the ‘staging’ date.
Employers with more than 50 (fifty) employees in their PAYE scheme as at 1st April (yes, really, it’s not an April Fool!) 2012 will have a staging date between October 2012 and July 2014 with the same rule applying, that the bigger you are, the earlier the date.
Anyone with fewer than fifty employees will have staging date after April 2014 but before February 2016
It is possible to bring forward your staging date if you wish to but only to a set number of dates already listed by The Pensions Regulator (TPR). There is no facility to defer or delay your staging date
The Pensions Regulator has a reasonably clear website: http://www.thepensionsregulator.gov.uk/ if you'd like to read more yourself
As the months roll by, the TPR will be communicating with employers and have promised to do so at least twice in the run up to their staging date.
For all Green Financial clients, I am happy to confirm your date, so you can be prepared in good time, as well as let you know what else, if anything, you need to do.
For me to do this please confirm:
Your PAYE scheme reference number(s) and the size of your PAYE scheme (as above).
Note: If you have more than one PAYE scheme, your staging date will be the one that's earliest.
I can also help clarify any duties you will have under the new rules and contribution levels that will apply
Please contact me if you wish me to help
Ian Green
iangreen@iangreen.com
19th October: I have been asked by a few clients what my fees are for assisting in this area- it will depend on the size of the scheme and the amount of work involved but the first stage(s) are generally just a nominal sum to cover the admin time involved if you don't want to do it yourself
But before you panic, don’t worry. This is being phased in over four years. This process is known as ’staging’
At its simplest, the bigger the company, the earlier the ‘staging’ date.
Employers with more than 50 (fifty) employees in their PAYE scheme as at 1st April (yes, really, it’s not an April Fool!) 2012 will have a staging date between October 2012 and July 2014 with the same rule applying, that the bigger you are, the earlier the date.
Anyone with fewer than fifty employees will have staging date after April 2014 but before February 2016
It is possible to bring forward your staging date if you wish to but only to a set number of dates already listed by The Pensions Regulator (TPR). There is no facility to defer or delay your staging date
The Pensions Regulator has a reasonably clear website: http://www.thepensionsregulator.gov.uk/ if you'd like to read more yourself
As the months roll by, the TPR will be communicating with employers and have promised to do so at least twice in the run up to their staging date.
For all Green Financial clients, I am happy to confirm your date, so you can be prepared in good time, as well as let you know what else, if anything, you need to do.
For me to do this please confirm:
Your PAYE scheme reference number(s) and the size of your PAYE scheme (as above).
Note: If you have more than one PAYE scheme, your staging date will be the one that's earliest.
I can also help clarify any duties you will have under the new rules and contribution levels that will apply
Please contact me if you wish me to help
Ian Green
iangreen@iangreen.com
19th October: I have been asked by a few clients what my fees are for assisting in this area- it will depend on the size of the scheme and the amount of work involved but the first stage(s) are generally just a nominal sum to cover the admin time involved if you don't want to do it yourself
Monday, 3 October 2011
Client Market Update October 3 2011
Well, I suppose it had to happen sometime, didn’t it…?
This is the first time, since early 2009, that I have had a minus figure of any note to report to clients on a quarter.
That said, given the magnitude of the numbers you will no doubt have heard on the news (‘markets down 12% in quarter’), a reduction that is ‘only’ 4-5% seems OK.
It is important to note that as always, these figures have to be produced at a point on a day – it is just a snapshot in time.
With the current volatility in the markets, had I run the reports a day or two earlier or later, it could easily have shown a small positive or a larger negative.
Perhaps most important of all is to remember that whilst it is always frustrating to see a minus figure over a quarter, that is a short term piece of data, and your portfolio is managed over the long term to match your life & lifestyle / income requirements.
Looking at the major markets like the FTSE100 and S&P500 – even though as I write the FTSE sits just above the 5,000 mark on news of Greece’s deficit, they are up around 50% since the lows of 2009.
So again, whilst I appreciate seeing the funds go down is never nice, I see no long term concern at all.
In fact this very process of rebalancing now means you’ll be buying into equities when they are low and will therefore see the commensurate gains in future when markets rise again, as they always do.
I hope you read (and enjoy – or at least find of interest) the various investment updates I send out, whether the regular monthly market commentary (MMC – next edition due within a week) or the ad hoc blog posts and emails such as this one.
If you do I am sure you’ll have read my thoughts on what is going on.
As you know, what worries me, is that much of what is reported is ‘selling newspapers’ – For example, when I was in the USA just over a week ago, when markets dropped by 5 points in a day the UK headlines I read online were along the lines of ‘crash’, ‘plummet’, ‘billions wiped off values’ etc
When markets went up by 5% last week, headlines were nowhere near using the opposite language and were quite muted – ‘markets up’, ‘rebound’, ‘rally’ etc
No talk of ‘billions added overnight!’
So that is the first thing, ‘don’t believe (all) the hype’!
And much of what is written then drives markets via investor sentiment – not facts.
I have written a number of times about market movements just because of investor sentiment when an announcement is made but actually there was no new news.
This is why I, as a professional, can take these more rational views when markets move in irrational ways.
But I am not pretending it is sunny when it is raining.
The volatility in markets is real, the problems around the world are real, and I assure you the way we manage the portfolios reflects all this.
In fact this very process of rebalancing now means you’ll be buying into more equities when they are low and will therefore see the commensurate gains in future when markets rise again, as they always do.
That is the very essence of the ‘triangle’ rebalancing process we manage for you. And as I always say, it needs ‘Time’. Those clients who, by their own defined investing timelines, have less time until the money is needed (one example would be approaching encashing a tax free lump sum in a pension), have less exposure to the markets. Those with a longer time horizon (one example would be those starting to save regularly in a pension) can afford to have greater exposure to the markets (see also http://greenfinancial.blogspot.com/2011/02/pound-cost-averaging.html
for the benefits of long term investing regularly in volatile market conditions)
What if you sold everything and went into cash now? If you sold into cash now, you would be doing the opposite of what everyone wants to do, which is “buy low, sell high”.
You’d be “buying high and selling low” – so I really can’t endorse that action.
However, if you fear that markets will continue to fall for the lifetime of your portfolio (ie until retirement and beyond) then of course you may wish to sell – but to repeat myself, that is not something I would professionally recommend in any way.
At the risk of repeating what I have written in the MMC a number of times, it is COUNTRIES that are making the headlines but it is COMPANIES that we/you invest in.
Corporate earnings are high, many companies (certainly outside the financial sector) have cash on their books and the outlook for mergers and acquisitions is positive.
The overwhelming message from leading economists at the conference I spoke at in the USA at the end of September was that markets look cheap at present (as long as you have the time to wait until they rise again)
Looking at earnings compared to equity prices (the oft mentioned p/e ratio) equities actually look cheap.
If anything, arguably now is the time to buy. And you don’t have to believe me, you can look at who many call the world’s greatest living investor, Warren Buffet, for evidence of that.
He is even buying banks!
It is always good to measure your portfolio (ie your pension and ISA etc) against what you want it to do, when you want it to do it (for example: provide a lifetime of income when you retire) rather than match it against an arbitrary index.
This is the first time, since early 2009, that I have had a minus figure of any note to report to clients on a quarter.
That said, given the magnitude of the numbers you will no doubt have heard on the news (‘markets down 12% in quarter’), a reduction that is ‘only’ 4-5% seems OK.
It is important to note that as always, these figures have to be produced at a point on a day – it is just a snapshot in time.
With the current volatility in the markets, had I run the reports a day or two earlier or later, it could easily have shown a small positive or a larger negative.
Perhaps most important of all is to remember that whilst it is always frustrating to see a minus figure over a quarter, that is a short term piece of data, and your portfolio is managed over the long term to match your life & lifestyle / income requirements.
Looking at the major markets like the FTSE100 and S&P500 – even though as I write the FTSE sits just above the 5,000 mark on news of Greece’s deficit, they are up around 50% since the lows of 2009.
So again, whilst I appreciate seeing the funds go down is never nice, I see no long term concern at all.
In fact this very process of rebalancing now means you’ll be buying into equities when they are low and will therefore see the commensurate gains in future when markets rise again, as they always do.
I hope you read (and enjoy – or at least find of interest) the various investment updates I send out, whether the regular monthly market commentary (MMC – next edition due within a week) or the ad hoc blog posts and emails such as this one.
If you do I am sure you’ll have read my thoughts on what is going on.
As you know, what worries me, is that much of what is reported is ‘selling newspapers’ – For example, when I was in the USA just over a week ago, when markets dropped by 5 points in a day the UK headlines I read online were along the lines of ‘crash’, ‘plummet’, ‘billions wiped off values’ etc
When markets went up by 5% last week, headlines were nowhere near using the opposite language and were quite muted – ‘markets up’, ‘rebound’, ‘rally’ etc
No talk of ‘billions added overnight!’
So that is the first thing, ‘don’t believe (all) the hype’!
And much of what is written then drives markets via investor sentiment – not facts.
I have written a number of times about market movements just because of investor sentiment when an announcement is made but actually there was no new news.
This is why I, as a professional, can take these more rational views when markets move in irrational ways.
But I am not pretending it is sunny when it is raining.
The volatility in markets is real, the problems around the world are real, and I assure you the way we manage the portfolios reflects all this.
In fact this very process of rebalancing now means you’ll be buying into more equities when they are low and will therefore see the commensurate gains in future when markets rise again, as they always do.
That is the very essence of the ‘triangle’ rebalancing process we manage for you. And as I always say, it needs ‘Time’. Those clients who, by their own defined investing timelines, have less time until the money is needed (one example would be approaching encashing a tax free lump sum in a pension), have less exposure to the markets. Those with a longer time horizon (one example would be those starting to save regularly in a pension) can afford to have greater exposure to the markets (see also http://greenfinancial.blogspot.com/2011/02/pound-cost-averaging.html
for the benefits of long term investing regularly in volatile market conditions)
What if you sold everything and went into cash now? If you sold into cash now, you would be doing the opposite of what everyone wants to do, which is “buy low, sell high”.
You’d be “buying high and selling low” – so I really can’t endorse that action.
However, if you fear that markets will continue to fall for the lifetime of your portfolio (ie until retirement and beyond) then of course you may wish to sell – but to repeat myself, that is not something I would professionally recommend in any way.
At the risk of repeating what I have written in the MMC a number of times, it is COUNTRIES that are making the headlines but it is COMPANIES that we/you invest in.
Corporate earnings are high, many companies (certainly outside the financial sector) have cash on their books and the outlook for mergers and acquisitions is positive.
The overwhelming message from leading economists at the conference I spoke at in the USA at the end of September was that markets look cheap at present (as long as you have the time to wait until they rise again)
Looking at earnings compared to equity prices (the oft mentioned p/e ratio) equities actually look cheap.
If anything, arguably now is the time to buy. And you don’t have to believe me, you can look at who many call the world’s greatest living investor, Warren Buffet, for evidence of that.
He is even buying banks!
It is always good to measure your portfolio (ie your pension and ISA etc) against what you want it to do, when you want it to do it (for example: provide a lifetime of income when you retire) rather than match it against an arbitrary index.
Friday, 2 September 2011
Critical Illness Positives
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After the brilliant life insurance advert (see http://youtu.be/TkyoCHCZlKw ) from Aviva, they have announced there will be a critical illness insurance advert this autumn.
For this, Aviva are to be commended. Unfortunately, too often, any press regarding Critical Illness is negative, usually based around a consumer whose plan has not paid out.
A recent exception to this rule was the celebrity and broadcaster Danny baker who was diagnosed with throat cancer.
http://www.bbc.co.uk/news/uk-england-london-11668994
He told how the financial consequences of the condition were dire. By his own admission, luckily his pal Chris Evans stepped in and provided money, £30,000+, for his immediate needs as he had no Critical illness policy.
Many years ago, I attended a small gathering of financial services professionals. One of the meeting topics was Critical Illness Cover. Unknown to the select group attending there was a guest speaker, the broadcaster James Whale (at that time on a popular radio show with a popular late night TV show too).
He had been diagnosed with a critical illness, and his IFA, who was who we all thought would be speaking, had advised he have Critical illness cover as a general policy, on his main mortgage and on his substantial rental property portfolio. Mr Whale had followed his advice, despite the relatively high monthly premiums. Like the rest of us, Mr Whale thought “It will never happen to me”. But it did. My memory of the event is that he then told how, from the Critical illness Cover payouts, he had enough to pay his medical bills, his mortgage was cleared and he had sufficient cleared income from the now unencumbered rental properties to live. He could choose not to work (because without the payout he would have ‘had to’) and take as long as he needed to recover, with the best possible medical treatment over and above the brilliant basic care he said he received from the NHS. James Whale now has a charity for the specific kidney cancer condition he suffered.
As a financial adviser, I know how complex some of the forms can be that need filling in, how difficult some of the questions are to answer and how frequently clients, with no malice or forethought, ‘forget’ conditions that should be disclosed without prompting or further explaining of the question from me. Many Critical Illness Insurers are trying to improve their application process, something which I applaud.
At the other end is the claims process. Again, too often, a complex, confusing process for people or their families in the middle of dealing with a serious medical condition. Once more, a few companies are leading the way with helplines to assist with the administration and medical issues with the claim.
The Association of British Insurers introduced guidance on insurance claims in 2008 to ensure customers who made a genuine mistake through non-disclosure were not disadvantaged. The guidance emerged after the level of rejected claims hit 16 per cent in 2007. They were dark days indeed for insurers whose reputation suffered and far more importantly consumers and policy holders who had claims rejected.
Pleasingly, since the guidance was introduced, figures from the Financial Ombudsman Service show that the number of long-term protection complaints has reduced by 50 per cent.
At Green Financial we had a Critical illness claim this year that the family initially wished to deal with themselves. But frustration soon set in as the ‘computer says no’ of the insurer took over, staffed by a ‘script reader’ in a call centre. As soon as I was aware of the issues, I obtained copies of the medical evidence from the client myself, re-read the policy terms and conditions to satisfy myself the claim was valid (always worth double checking) and then contacted the claims manager. Things soon progressed and the claim was paid.
The Association of British Insurers has recently revealed the 2010 figures for Critical illness claims:
Insurers paid out a total of £776 million on critical-illness policies.
The total amount paid to customers relating to Critical Illness policies has fallen slightly from 2009, which the ABI attributes to customers cancelling their policies due to budget constraints. I would also wager that less new policies are being taken out as in recent years, the premium cost has risen, as medical science has improved our chances of surviving conditions that once would have been more serious (or ‘critical’)
So what of the regularly erroneously reported statement that 'these policies never pay out’.
11,161 critical illness claims were paid last in 2010, amounting to 89.9 per cent of all claims. 1,248 claims were declined.
Scottish Provident, a leading Critical Illness Insurer has released all their 2010 figures. Here are a few:
60% of all claims were cancer related. The average age for claim was 46
Of these, 40% were men and 60% were women.
Malignant Melanoma was 5% of claims
Heart Attack was the second largest claim group, with 12% of claims. 80%+ were male with an average age just under 50.
A further 4% of claims were for coronary artery by-pass or heart valve replacement (something I am personally likely to claim on one day due to my own congenital heart defect)
Not all companies offer child cover on their policies but Scottish Provident do. 4% of their claims were on the children of the policyholder
Strokes and Multiple Sclerosis accounted for 6% of claims for each condition.
Most Critical Illness providers offer a long list of conditions covered, indeed many compete by declaring how many they cover, but industry wide statistics back up the numbers from Scottish Provident.
Almost 9 out of 10 claims are from the ‘big 4’ of:
-Cancer
-Heart related
-MS
-Stroke
Yes, Critical Illness policies are expensive.
Yes, we all have other things we’d like to or need to spend money on
But consider the cost of having a policy and not needing it, to needing it and not having it.
For this, Aviva are to be commended. Unfortunately, too often, any press regarding Critical Illness is negative, usually based around a consumer whose plan has not paid out.
http://www.bbc.co.uk/news/uk-england-london-11668994
He told how the financial consequences of the condition were dire. By his own admission, luckily his pal Chris Evans stepped in and provided money, £30,000+, for his immediate needs as he had no Critical illness policy.
Many years ago, I attended a small gathering of financial services professionals. One of the meeting topics was Critical Illness Cover. Unknown to the select group attending there was a guest speaker, the broadcaster James Whale (at that time on a popular radio show with a popular late night TV show too).
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| http://www.jameswhalefund.org/ |
As a financial adviser, I know how complex some of the forms can be that need filling in, how difficult some of the questions are to answer and how frequently clients, with no malice or forethought, ‘forget’ conditions that should be disclosed without prompting or further explaining of the question from me. Many Critical Illness Insurers are trying to improve their application process, something which I applaud.
At the other end is the claims process. Again, too often, a complex, confusing process for people or their families in the middle of dealing with a serious medical condition. Once more, a few companies are leading the way with helplines to assist with the administration and medical issues with the claim.
The Association of British Insurers introduced guidance on insurance claims in 2008 to ensure customers who made a genuine mistake through non-disclosure were not disadvantaged. The guidance emerged after the level of rejected claims hit 16 per cent in 2007. They were dark days indeed for insurers whose reputation suffered and far more importantly consumers and policy holders who had claims rejected.
Pleasingly, since the guidance was introduced, figures from the Financial Ombudsman Service show that the number of long-term protection complaints has reduced by 50 per cent.
At Green Financial we had a Critical illness claim this year that the family initially wished to deal with themselves. But frustration soon set in as the ‘computer says no’ of the insurer took over, staffed by a ‘script reader’ in a call centre. As soon as I was aware of the issues, I obtained copies of the medical evidence from the client myself, re-read the policy terms and conditions to satisfy myself the claim was valid (always worth double checking) and then contacted the claims manager. Things soon progressed and the claim was paid.
The Association of British Insurers has recently revealed the 2010 figures for Critical illness claims:
Insurers paid out a total of £776 million on critical-illness policies.
The total amount paid to customers relating to Critical Illness policies has fallen slightly from 2009, which the ABI attributes to customers cancelling their policies due to budget constraints. I would also wager that less new policies are being taken out as in recent years, the premium cost has risen, as medical science has improved our chances of surviving conditions that once would have been more serious (or ‘critical’)
So what of the regularly erroneously reported statement that 'these policies never pay out’.
11,161 critical illness claims were paid last in 2010, amounting to 89.9 per cent of all claims. 1,248 claims were declined.
Scottish Provident, a leading Critical Illness Insurer has released all their 2010 figures. Here are a few:
60% of all claims were cancer related. The average age for claim was 46
Of these, 40% were men and 60% were women.
Malignant Melanoma was 5% of claims
Heart Attack was the second largest claim group, with 12% of claims. 80%+ were male with an average age just under 50.
A further 4% of claims were for coronary artery by-pass or heart valve replacement (something I am personally likely to claim on one day due to my own congenital heart defect)
Not all companies offer child cover on their policies but Scottish Provident do. 4% of their claims were on the children of the policyholder
Strokes and Multiple Sclerosis accounted for 6% of claims for each condition.
Most Critical Illness providers offer a long list of conditions covered, indeed many compete by declaring how many they cover, but industry wide statistics back up the numbers from Scottish Provident.
Almost 9 out of 10 claims are from the ‘big 4’ of:
-Cancer
-Heart related
-MS
-Stroke
Yes, Critical Illness policies are expensive.
Yes, we all have other things we’d like to or need to spend money on
But consider the cost of having a policy and not needing it, to needing it and not having it.
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