It will never happen to me
Weall know that illness happens, but it is an entirely naturally humantrait that people think it will happen to the person living next dooror the person sitting next to them, rather than to them themselves.
However, some of the following statistics might just change your thinking on this:-
· More than 100 women a day are diagnosed with breast cancer.
· Testicular cancer is one of the most common cancers for men between the ages of 15 and 45.
· In 2006, 22% of people aged between 16 and 44 had a long standing illness.
· Also in 2006, 45% of people aged between 45 and 65 also had a long standing illness.
· In 2006, just under 20% of 35 to 44 year olds had experienced some kind of cardio vascular condition.
· Research from October 2006 found that 25% of strokes happen to people under 65.
· Research shows that the chance of suffering a critical illness before aged 65 is 1 in 4 for men and 1 in 5 for women.
· Each and every year, approximately 90,000 people of working age are diagnosed with cancer.
The above statistics are indeed quite frightening, but it is not all doom and gloom. With medical advances, people are now much more likely to survive critical illnesses than ever before. However,it is by no means certain that an individual will be able to return towork after treatment, and it is this issue that will have the hugeimpact on their income earning position.
Aswith so many issues of this type, one obvious option is to go down the“insurance route” and there are certainly no shortage of insurancecompanies and products available to meet the protection needed.
Thekey, as always, is to evaluate what type of cover is needed and theextent of such cover, and then to secure the best product possible inthe market place taking into account the quality of the cover provided,whilst also of course taking into account the cost involved.
For further information on how to protect yourself then please contact Steve Carruthers from Blevins Franks Financial Management Ltd, an FSA regulated company.
By Steve Carruthers
The Government's new welfare reform systemsthat became effective in October 2008 radically change the way in whichbenefits are paid for illness or disability under the new Employmentand Support Allowance system leaving those people without incomeprotection vulnerable.
Under the old system of State benefits (replaced this October),anyone claiming was not forced to seek work whilst they wereincapacitated from work. However, it is a whole new picture now.Claimants are forced to undertake any type of work that they aremedically able to.
The following is a real life case study personal to David Warren of LV=
"I used to believe that there was no need for any type of healthinsurance for myself. This was because I was young fit and healthy. Whyon earth would I need to worry about being incapacitated? On top ofthis, my work will pay me a benefit for 6 months if I am off sick. Inaddition to this, surely I could rely on the State to look after me -after all, I pay my taxes and my national insurance?
An event that occurred 4 years ago involving my brother in law mademe see it in a different light. Kevin, aged 34, worked as a selfemployed sales rep. They (my sister and Kev) have 1 child aged 3. Kevwas the main breadwinner and the family relied heavily on him beingable to work.
Kev was involved in a car accident with a drink driver. This lefthim with a severely broken leg, broken pelvis, broken ribs, dislocatedshoulder and nasty head injuries. Although not life threatening, it wasevident very early on that he would not be returning to work for a longtime.
What did this mean?
* Both my sister and Kev were quite sensible people - they had lifecover and also had over 3 months worth of savings to fall back on. Kevwas owed money from sales already completed so all in all they couldsurvive for 4 months.
* Kevin was told he wouldn't work again for at least 18 months andwould almost certainly never return as a sales representative doing30,000 miles a year.
* State benefit was eventually paid - Kev received less than £80 aweek whilst he was off. This barely covered the weekly food bill forthe family.
* The first thing they had to do was sell their house. They hadmoved in to a lovely 3 bedroom house in Cheshire 6 months earlier, witha view to having another child, and had mortgaged quite heavily asbusiness was good for Kev. It was not an option for them to maintainthe higher mortgage payments so they sold the house.
* They moved in to a 2 bedroom house in an area that was certainlynot their first choice for raising children but it was all they couldafford.
2 years on:
* Kev is now back at work which is great news.
* He works in a local supermarket as a checkout operator and does about 10 hours a week.
* He has not driven a car since the accident.
* The plans for another child have well and truly been put on hold as they just cannot afford it.
What could they have done?
The answer is simple - Income Protection insurance.
The premium for Kev to have £1,500 a month in benefit would havebeen £42.49 monthly. They could have stayed in their dream house, theone that they had both worked so hard for.
I took my cover out 3 days after Kev's car accident".
There are many car accidents every day, as well as generalaccidents. These are normally unexpected and can have dire consequences- not just for the person injured but for the whole family.
As well as accidents like Kevin's there is also illness and disability to consider, sometimes long-term. Statistics provided by statistics.gov.ukshow that 1 in 4 men have a chance of suffering a critical illnessbefore retirement age; women's odds are marginally higher with a 1 in 5chance.
In the contracting industry there are many individuals who haveearned good money and have saved a good nest egg for their future. Theyare financially responsible and wise enough to protect their futurelifestyle.
But, what if something terrible happened? An accident, illness or disability?
Under the new State system any savings over £16,000 disqualify youfrom benefits. From as low as £6,000 in savings your benefits arereduced. So all your hard earned money would end up financing youthrough your incapacity for work - and who knows how long that could be?
Government statistics say that 50% of claimants on IncapacityAllowance have been on benefits for 5 years and as John Hutton, formerSecretary of State for Work & Pensions quoted "after two years onState incapacity benefit, people are statistically more likely to dieor retire than return to work".
LV= in the private sector state that there average claim lasts for a seven year period.
All too often in the Financial Services industry I see advisorsselling the "sexier" products such as pensions and investments. In aworld where medicine is so advanced, even from 25 years ago, people areliving longer with illnesses that they would previously have died of.
It is paramount to make people aware that the Protection Insurancesare far more important than retirement planning due to the way healthand lifestyles have evolved.
Government warning - "Years existing off State benefits could be a seriously stressful and detrimental to your health"
It is important to keep up future payments, in order to ensure that the cover under the plan continues.
At no time during or at the end of the term does this policy provide a surrender or encashment value.
With the current economic crisis still in full swing, added to thatthe enormous increase in the cost of living, there is a certain levelof uncertainty within the contracting and freelancing industry.
Whereas some research suggests a surge in the industry as employerswill not want the cost and responsibility of having employees and willinstead choose contractors; other research implies that businesses willbuckle up their belts and postpone projects altogether.
All of this is added stress to our daily lives and we all know thatstress can be a killer. On top of the current conditions, imagine whatwould happen if you suddenly and unexpectedly became ill, disabled orinvolved in an accident?
Some 2.6 million people in the UK are currently claiming Statebenefits for illness or disability. 50% have been on these benefits for5 or more years.
Statistics provided by David Warren, Business Development Manger at LV= show that an ill or disabled person's claim lasts for an average of seven years.
In a current real life case study provided by LV=
Alan, a 50 year old IT Consultant, had an LV= Income Protection policyfor 6 years before suffering from depression. This condition is stillongoing and LV= have been paying the claim for 5 years. LV= willcontinue to pay until Alan returns to work, dies or the plan finishesits policy term. The income that he is receiving is tax and NICs freeand his monthly insurance premiums were waived when he made the claim.
Under new Government legislation effective in October 2008, Alan would be receiving around £119 weekly (statistics.gov.ukshow that the average household expenditure is £450 per week) in Statebenefits. Given the type of illness, it is also likely that he would beassessed as medically able to undertake some kind of work.
This does not take into account the issue of whether or not Alan hadany personal savings. Savings of over £6,000 reduce state benefits andthose over £16,000 do not qualify at all.
Luckily an LV= Income Protection policyensured that Alan is incapacitated from his chosen job and notdiscriminated against being able to undertake any or any suited job. Inother words, Alan is not expected to undertake any type of work otherthan that type of work that he was already doing.
Any savings he may or may not have will still be intact. Alan's mainsource of income was through dividends not salary, thankfully, LV= count dividends as income that they can insure. Many other providers in the market do not.
The graph below shows net weekly incomes based on three differentsalary levels and the level of benefit and percentage decrease inincome levels on State benefits.
As the graph shows, someone on £40,000 per annum would take a massive 85% reduction in income.
Income Protection insurance policies can be set up for the period ofyour working life until the time that your pension kicks in. Monthlypremiums are calculated according to age and policy terms.
Mortgage Protection policies can be added in conjunction with theIncome Protection and each can run for their own term as necessarygiving you peace of mind that you are financially secure should theunthinkable happen.
It is important to keep up future payments, in order to ensurethat the cover under the plan continues. At no time during or at theend of the term does this policy provide a surrender or encashmentvalue.
by
20 reasons why yours should be an LV= policy
1) You can insure yourself for 50% of your annual earnings including dividend income
2) Policies available to employed or self-employed people
3) You can choose your level of monthly payout up to a maximum of 50% of annual earnings
4) Choice of deferred period for payout of 1, 2, 3, 6, 12 or 24 months
5) Minimum policy termination age 50 years, maximum 65 years
6) Monthly premiums remain the same and do not increase with age
7) Ability to index link so that premiums and payouts fall in line with the retail price index (RPI)
8) Multiple claims can be made for the same illness or condition with a 6 month claim period
9) New illnesses can be claimed within 1 day of returning to work
10) A Mortgage Protection policy can be linked to Income Protection
11) Unemployment protection can be added as an option
12) Waiver of premiums once a claim has been made
13) Policies can be changed as lifestyles change
14) Big "T" underwriting - you provide minimal information and thepolicy is underwritten by telephone, saving valuable time in setting upthe policy
15) LV= have an existing IT Contractor client base
16) Benefits are income related as opposed to Government flat rated benefit payouts
17) Benefits are free of tax and national insurance contributions
18) No workshops or group attendances like the Government schemes
19) You are not forced into taking employment that they would not normally undertake
20) Second to none customer service; quick turn-around in claims handling and committed customer support
If the unthinkable were to happen and you were unable to work due toaccident, sickness or disability, either in the short or long term,wouldn't you rather the have peace of mind and financial securityenabling you and your family to enjoy the lifestyle that you chooseopposed to the one you would be subjected under Her Majesty's Government benefit scheme effective in October 2008?
It is important to keep up future payments, in order to ensurethat the cover under the plan continues. At no time during or at theend of the term does this policy provide a surrender or encashmentvalue.
For further information on Income Protection, UnemploymentProtection and Mortgage payment Protection insurance policies pleasecontact:
Steve Carruthers on (+44) (20) 73361111
Managing Director
Blevins Franks Financial Management Ltd
by
20 reasons why yours should be an LV= policy
1) You can insure yourself for 50% of your annual earnings including dividend income
2) Policies available to employed or self-employed people
3) You can choose your level of monthly payout up to a maximum of 50% of annual earnings
4) Choice of deferred period for payout of 1, 2, 3, 6, 12 or 24 months
5) Minimum policy termination age 50 years, maximum 65 years
6) Monthly premiums remain the same and do not increase with age
7) Ability to index link so that premiums and payouts fall in line with the retail price index (RPI)
8) Multiple claims can be made for the same illness or condition with a 6 month claim period
9) New illnesses can be claimed within 1 day of returning to work
10) A Mortgage Protection policy can be linked to Income Protection
11) Unemployment protection can be added as an option
12) Waiver of premiums once a claim has been made
13) Policies can be changed as lifestyles change
14) Big "T" underwriting - you provide minimal information and thepolicy is underwritten by telephone, saving valuable time in setting upthe policy
15) LV= have an existing IT Contractor client base
16) Benefits are income related as opposed to Government flat rated benefit payouts
17) Benefits are free of tax and national insurance contributions
18) No workshops or group attendances like the Government schemes
19) You are not forced into taking employment that they would not normally undertake
20) Second to none customer service; quick turn-around in claims handling and committed customer support
If the unthinkable were to happen and you were unable to work due toaccident, sickness or disability, either in the short or long term,wouldn't you rather the have peace of mind and financial securityenabling you and your family to enjoy the lifestyle that you chooseopposed to the one you would be subjected under Her Majesty's Government benefit scheme effective in October 2008?
It is important to keep up future payments, in order to ensurethat the cover under the plan continues. At no time during or at theend of the term does this policy provide a surrender or encashmentvalue.
For further information on Income Protection, UnemploymentProtection and Mortgage payment Protection insurance policies pleasecontact:
Steve Carruthers on (+44) (20) 73361111
Managing Director
Blevins Franks Financial Management Ltd
by
20 reasons why yours should be an LV= policy
1) You can insure yourself for 50% of your annual earnings including dividend income
2) Policies available to employed or self-employed people
3) You can choose your level of monthly payout up to a maximum of 50% of annual earnings
4) Choice of deferred period for payout of 1, 2, 3, 6, 12 or 24 months
5) Minimum policy termination age 50 years, maximum 65 years
6) Monthly premiums remain the same and do not increase with age
7) Ability to index link so that premiums and payouts fall in line with the retail price index (RPI)
8) Multiple claims can be made for the same illness or condition with a 6 month claim period
9) New illnesses can be claimed within 1 day of returning to work
10) A Mortgage Protection policy can be linked to Income Protection
11) Unemployment protection can be added as an option
12) Waiver of premiums once a claim has been made
13) Policies can be changed as lifestyles change
14) Big "T" underwriting - you provide minimal information and thepolicy is underwritten by telephone, saving valuable time in setting upthe policy
15) LV= have an existing IT Contractor client base
16) Benefits are income related as opposed to Government flat rated benefit payouts
17) Benefits are free of tax and national insurance contributions
18) No workshops or group attendances like the Government schemes
19) You are not forced into taking employment that they would not normally undertake
20) Second to none customer service; quick turn-around in claims handling and committed customer support
If the unthinkable were to happen and you were unable to work due toaccident, sickness or disability, either in the short or long term,wouldn't you rather the have peace of mind and financial securityenabling you and your family to enjoy the lifestyle that you chooseopposed to the one you would be subjected under Her Majesty's Government benefit scheme effective in October 2008?
It is important to keep up future payments, in order to ensurethat the cover under the plan continues. At no time during or at theend of the term does this policy provide a surrender or encashmentvalue.
For further information on Income Protection, UnemploymentProtection and Mortgage payment Protection insurance policies pleasecontact:
Steve Carruthers on (+44) (20) 73361111
Managing Director
Blevins Franks Financial Management Ltd
In my previous article I wrote about the new welfare reform paper and the financial impact that it could have on us if we were to become unable to work due to illness or disability.
It is obvious to say that nobody knows if and when they are suddenlyand unexpectedly going to be taken ill, either for a short-term periodor perhaps terminally. Due to the stress of modern day life, most ofus, whatever age, can name one or even several people we know that weretaken ill unexpectedly whom "we all thought were fit and healthy".
Currently (2008) there are 2.6 million people in the UK on benefitsfor illness or disability. In October 2008 the benefits system comesunder new ruling whereby Government focus is aimed at getting the sickand disabled back to work under their new Employment and Support Allowance benefit.
This new bill will force numerous people to take any type of workthat they are medically capable of undertaking. Whatever happened tofreedom of choice? Those of us who strived to advance ourselves,undertook numerous years of costly training to gain the expertise thatenables us the freedom of choice to work in the sectors that we desire…where would we be placed? There will be no choices under the new Statesystem.
Like unemployment benefit claimants, all new applicants will have toundergo constant interviews, assessments and attend work related orsupport groups in order to receive their benefits. Not an idealsituation added to the stress of your illness.
Seemingly the new bill is aimed at increasing employment statisticsto 80% of the working population and sorting the chaff from the wheat;but invariably as with the introduction of every new legislation, therewill be victims. You simply cannot put square pegs into round holes.
Whenever I talk to people about protection insurance, the firstthing that invariably springs to mind is life insurance. It is in truthquite a straightforward and simple discussion as most people feel thatthey should have, at the very least, some form of life protection inplace.
However, my view is that whilst pure life insurance can clearly beimportant, more often that not other forms of insurance, particularlyIncome Protection, are just as important. Indeed, in many cases, IncomeProtection can be much more important and relevant than life assurance.
Although it might be stating the obvious, pure life assuranceusually only pays out upon death. We live in a world which has seenremarkable advances in medical science over the past 50 years.
Statistics sourced from www.statistics.gov.ukin 2007 show that 1 in 4 men have a chance of suffering a criticalillness before retirement age and women's odds are marginally higherwith a 1 in 5 chance.
Purely as an example, someone who had a heart attack say 30 yearsago would have invariably died and the need for life assurance wasobvious. Thankfully, the position today is somewhat different and aheart attack is not an immediate death sentence. It can therefore beargued that life insurance on its own is not the answer.
For whatever reasons, the majority of people in the UK do not haveIncome Protection. I believe that much of the fault here lies with thefinancial services industry. Most advisors simply do not understand theprotection market place and how different types of policies operate.Most advisors seem to want to concentrate on what they see as the"sexy" areas of financial planning, namely pensions and investments.
In the UK a study carried out by Scottish Widows, statistics showed that:-
* 2.2m parents have a mortgage but no associated life cover
* 35% of all parents have no life cover
* 72% of new mortgages do not have critical illness cover
* 233,600 new cases of malignant cancer were diagnosed in 2004
Further statistics provided by David Warren, Business DevelopmentManger for LV= show that an average claimant is paid for a seven yearperiod. Imagine trying to live off the state benefit allowance of£84.50 for a single person aged 25+ weekly for that period of time.
By simply refusing to mention protection issues, financial advisors could be leaving their clients seriously exposed.
To my mind, it is absolutely crazy that an advisor will recommend toa client that a pension contribution be made running into manythousands of pounds, whilst ignoring the fact that for a fraction ofthe cost, an all singing and dancing protection programme could be putin place.
We also live in a world in which the Government is simply not in aposition to provide cradle to grave protection. The demands placed onthem are severe indeed, hence the forthcoming shake up, and in myexperience the vast majority of people that I meet have no wish ordesire to be dependent on the State.
It is therefore something of a conundrum that people want to beindependent of the State, but if anything were to go wrong, they wouldfind themselves totally dependent and reliant upon it.
Logic and financial ability should ensure that we all take steps togive ourselves and our families adequate financial protection.Protecting ourselves with an Income Protection policy enables peace ofmind and non-reliance on the ever changing Government policies, leastnot said, maintaining an acceptable lifestyle.
The following is a real life case study provided by David Warren at LV=:
John, a 54 year old IT consultant, had an LV Income Protection policy for4 years. John started to suffer from mild wrist pain which, over time,became quite a serious problem. Eventually, john was unable to do hisjob. LV has been paying this claim for 3 months so far. They haveoffered to pay for physiotherapy treatment to help get John back towork.
The above is a typical claim. If John had not had his private IncomeProtection he would find himself forced to undertake any work that hewas medically capable of undertaking under the new welfare reformssystem effective October 2008. Given his injuries, there would be manyjobs that he could do.
If John also had savings of over £16,000 he would be refused benefits and would have to live off his savings. With his LV Income Protection policy,John is not expected to take up any job other than the job or same workthat he was previously doing. He does not have to spend his hard earnedsavings and he can rest with peace of mind knowing that he will befinancially secure until such a time that he is fit enough to return towork.
It is important to keep up future payments, in order to ensure that the cover under the plan continues.
At no time during or at the end of the term does this policy provide a surrender or encashment value.
With effect from 27th October 2008 the Department for Work and Pensions(DWP) will introduce the new Employment and Support Allowance thatreplaces Incapacity Benefit and Income Support on incapacity grounds.These allowances are awarded for people who are not working because ofillness or disability.
The Government's thinking is that "everyone should have theopportunity to work and that people with an illness or disabilityshould get the support they need to engage in appropriate work, if theyare able". In other words, if there is even a slight chance that youare able to work, work indeed you will!
In theory I think the new system is great, it will sort out some ofthe claimants that are fake, but as always there will be some peoplecaught who shouldn't be.
The Government potentially seems to have forgotten aboutdiscrimination when putting this paper together. In an article I readrecently, published in the Independent Newspaper ,there were comments made from current claimants who have been literally'terrified' and 'harassed' by colleagues at work because of theirdisabilities or illnesses. These people are genuinely frightened ofgoing to work and, under the new regime they will have absolutely nochoice; if they are capable, they either go to work or lose theirbenefits.
It seems to me that people want the right to work in their chosenfield, not to be dictated to by Government and forced to work'anywhere' just to improve employment statistics and ease HM Treasury'sburden.
Current claimants will initially remain on the existing system(suffice that they meet entitlement criteria) and all new applicantswill be assessed under a new regime for the new scheme. There will be"support and financial help together with access to a personal adviser"says the DWP.
Making a claim is a stringent process; new claimants will have toundergo a 13 week assessment phase whilst being paid a basic ratepayment of £60.50 a week for single people aged 25 or over; £47.95 aweek for a single person under the age of 25 and £94.95 weekly forcouples.
For many people these payments are hardly enough for anyone to survive on, let alone 'live'.
After the assessment period, in which time you would have to haveattended various interviews, medical assessments and activity groups,you will receive the DWP decision to benefit entitlement.
Entitlements will be awarded either on contribution based employment(if the NICs have been paid up to date) or income based employment(where insufficient NICs have been paid or capital is in excess of£16,000). Not forgetting, if you have assets over £16,000 you probablywill not qualify at all. Any assets over £6,000 reduce the level ofbenefits paid. So those of us who have been savvy enough to save andplan for our future will have our 'rainy day' funds whittled away.
In the 14th week after making a claim, those who are able to workwill have to attend work-related activity groups. They will receive ahigher payment of benefit of £84.50 weekly for a single person over 25,with the possibility of a 'top up' to £118.95 if the assessment isincome based and the claimant has a partner.
Those who are medically assessed as unable to work will have toattend support groups from the 14th week. Benefits will rise to £89.50weekly with the possibility of a further £17.60 weekly for the 'poorer'claimants.
So, if you suddenly find yourself unable to work due to illness ordisability, at a time that is already stressful, let alone sufferingthe financial impact; you will find yourself undergoing medicalassessments, interviews and then, finally, having to join either workrelated or support groups.
To me, all this is not exactly appealing when you're ill and need peace and quiet to recuperate.
John Hutton, former Secretary of State for Work & Pensionsquoted "after two years on State Incapacity Benefit, people arestatistically more likely to die or retire than return to work".
Statistics sourced by statistics.gov.ukshow that men have a 1 in 4 chance of suffering a critical illnessbefore retirement; for women the odds increase to 1 in 5. This isillness alone; consider the number of daily car and domestic accidentsthat occur in the UK.
It is perhaps acceptable that our taxes and national insurancecontributions are being used to fund a benefit fund for people who areincapacitated and unable to work, but for anyone who has some savings;a level of income required greater than the state benefits and theability to make a better arrangement, then my advice is to take out anIncome Protection Insurance Policy.
Monthly payments are calculated on the level of benefit that youneed to maintain the lifestyle that you desire and you can then resteasy safe in the knowledge that you and yours will be financiallysecure.
After all, none of us can ever know if we will become the next statistic.
It is important to keep up future payments, in order to ensurethat the cover under the plan continues. At no time during or at theend of the term does this policy provide a surrender or encashmentvalue.
Payment Protection Insurance (often referred to as PPI)
There has been a huge amount of press coverage about paymentprotection insurance (PPI) and virtually all of it has been far fromcomplimentary.
So what is PPI, and why does it cause such a stir, to such an extentthat “ambulance chasing” adverts in the popular press trawl for thosewho have been sold this type of insurance?
Basically, PPI is sold to those entering into a finance agreementand is designed to cover credit payments in the event of illness orredundancy.
Whilst this might be seen as an extremely worthwhile form ofinsurance, unfortunately the quality of the products has beenquestioned and in many cases the policies themselves were designed toexclude many of the most common situations that could lead to debtproblems.
A further criticism of PPI was that the premiums are very expensive, and were not properly explained to the policyholder.
However, it is not all bad news, and Clive Briault, who is theFinancial Services Authority (FSA)’s Managing Director for RetailMarkets said:-
“When properly structured, explained and sold, payment protectioninsurance can provide worthwhile cover for consumers against unexpectedchanges in their personal circumstances”.
Our own advice here would be to say that if you do have paymentprotection insurance, then make sure that you understand what is and isnot covered, and to also find out exactly how much your policy iscosting.
This is a very interesting question and the exact position is far from straightforward and clear cut.
Let’s first look at the much more simple route, namely the premium is paid by the individual.
This would involve a policy being taken out by the individual and it is the individual who would pay the premium.
Typically, the maximum level of cover granted by an insurancecompany would be in the region of 65% of salary. In the event of aclaim being made the benefits would be paid direct to the individualwithout any liability to tax. The premium is paid by the individualwithout any tax concessions or allowances, and any benefit payable ispaid tax free.
Let’s now look at a situation where the company pays the premium.This is particularly relevant when it is a limited company consistingof just one person who is the shareholding director.
Under this route, it is perfectly allowable for the company to paythe premium and for this to be treated as a genuine business expense.This would reduce profit and thus reduce tax.
On the basis that the premium would be exactly the same as paid bythe company as if paid by the individual, then clearly the ability toobtain tax relief on the premium is in itself an immediate advantage.
However, the situation becomes a little more complex if a claim isthen made. Any benefit payable would be paid to the company (as it isthe company that has paid the premium) and the benefit would then betreated as a trading receipt and would be taxed accordingly.
Having received the benefit, the company would then pay it to theindividual employee via the usual PAYE system. The benefit would thenattract income tax and national insurance in the usual way. At the sametime, the employer would treat these payments to the employee as agenuine deductible business expense.
Our general view is that the premium being paid by the individual(as opposed to the company) is by far the most simple method,particularly if a claim is then made at some future date, in that thebenefits payable are genuinely tax free to the individual.
However, it must be acknowledged that the route whereby the companypays the premiums does have a taxation advantage, in that the premiumscan be treated as a deductible business expense. The complicationarises if and when a claim is then made, as detailed above.
There was always one particular “grey area”, and that concernedwhether or not a policy under which the premium is paid by the employerwould be treated as a P11D benefit in kind on the shareholdingdirector. We have taken expert advice on this matter and can confirmthat it would not be treated as a benefit in kind.
Therefore, and since it is not treated as a benefit in kind, thenthere is a taxation advantage if the premiums are paid by the company,but it does become a much more complex situation if and when a claim ismade.