Insurance is often overlooked when it comes to looking after your finances. Most people want to put their money into things that will make them money, rather than paying for insurance you hope you will never need. However, making sure you have the right type and level of protection is arguably more important than anything else in your financial planning. Like house, car and pet insurance, it is there in case things go wrong and people often don’t think about it until something has gone wrong. Luckily, Phoenix offer lots of different insurance policies which you are covered for as standard, and some additional protections you may wish to take out.
Having advised for so long we have seen just about every tragic example that you can think of. In every case there was a big difference in outcome between those who had protected themselves and those that hadn’t. Although death and ill health are things that most of us don’t want to think about, the benefit of protection is that you can cover them and then forget about it. Then it isn’t nagging away at the back of your mind.
Life Cover
You are automatically enrolled in this benefit when you join. The scheme will pay out a fixed tax-free lump sum if you die and the amount paid out is 12 times your insurable salary (i.e. base salary excluding bonuses) which is exceptionally generous. This means that if your salary was £30,000, your beneficiary would be paid £360,000 in the event of your death. It is important to let Phoenix know who you would like to benefit were you to die – you can do this on MyChoice and you can choose multiple people to benefit should you wish. Phoenix will allow you to extend the cover to your partner at increments of £25,000 (up to a maximum of £250,000) for an additional premium should you wish. This would be a benefit in kind if you chose to do this, and therefore you would pay income tax on the premiums levied. Life cover is usually used to pay off any debts (such as a mortgage) and to provide a sum of money to beneficiaries to enable them to maintain their standard of living. Due to the cover Phoenix provide it is likely that you personally have enough, however it is worth considering whether your partner does too.
Income Protection
Likewise, you are automatically enrolled in this benefit when you join. This scheme pays out 50% of your income to you if you are unable to work through accident or illness, all the way up until state retirement age (i.e. the age you are eligible to receive your state pension, currently either 65,66 or 67 depending on the year you were born). The payments from this will be taxable to income tax so it is worth considering whether you need to arrange some additional personal cover privately, if you think that 50% of your salary may not be enough to cover your outgoings.
Critical Illness
The final offering is one that you are not automatically enrolled in but you can join at any time. Critical Illness cover pays out a tax-free lump sum in the event you are diagnosed with a defined, serious illness (such as cancer, heart attack, Parkinson’s etc.) and survive for at least 14 days. You can choose to cover yourself in increments of £25,000 up to a maximum of £500,000 (or 5x base salary, whatever is lower), while your partner can be covered in increments of £25,000 up to a maximum of £250,000 (or the same level as you but no higher). It is very important to read what illnesses are not covered and if you have any pre-existing conditions these would not be covered either. Similarly to buying additional life cover, this would be a benefit in kind if you chose to buy this cover, and therefore you would pay income tax on the premiums levied. Critical Illness cover is often considered where you have little savings and big debts (i.e. mortgage) and are concerned a serious illness would mean you may not be able to keep up repayments, particularly if you are the main income earner in a family. Some people also find it gives them some comfort knowing that the financial side of things would be covered while they are dealing with the emotional side of being diagnosed with a serious illness.
