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One recent development of a scheme involving the use of immediate annuities deserves mention, though it is rather complicated. Old people often have few assets left other than the house in which they live (usually one they have bought for retirement). These are the people who may need to raise their incomes to make up for the effects of inflation. One way they can do this is by raising a loan on their home from a critical illness insurance company and investing the money in an immediate annuity (in the case of a couple it will be on critical illness insurance).

Loans of up to 80% of the value of the house can be obtained. The interest payments on the loan are met out of the annuity payments. This leaves a small amount over, which is paid out to the annuitants. But they can also reclaim tax relief on the loan interest from the Inland Revenue (provided, that is, that they have sufficient income tax liability). Usually the interest rate on the loan is fixed for the life of the plan at some low rate such as 7% p.a.; the annuity rate is usually also below the normal market level to compensate for this. The return from the scheme will depend on the age of the annuitants.

Two points are worth emphasising since they are not always appreciated by those thinking about such schemes. First, the house is the security for the loan and on the death of the annuitant(s) has to be sold to repay the loan, unless the executors have other assets available to meet the debt. Depending on the proportion of the value of the house taken as a loan, there will still be something left over for the dependants of the borrowers, but obviously not as much as if they had not used this scheme. The annuitants themselves have complete security of tenure, but the sale of the house and the loss to the dependants of the amount of the loan must be taken into consideration.

The majority of critical illness insurance contracts are designed to provide protection or investment benefits over a period of 10 years or more in return for regular premium payments. But there is another class of policies - single-premium policies, where one lump sum only is paid at the outset. Before the year 1968 single-premium policies had considerable tax advantages, and so it made sense for investors to put their money into a critical illness insurance policy, and get the investment gains tax-free, rather than use other methods. Since 1968, however, most single-premium policies have been non­-qualifying, which means that they are eligible neither for tax relief on the premium nor for freedom from tax in the hands of the policyholder, and so it is perhaps surprising that such policies have had great success in attracting money for investment.One reason for this is that since the mid 1960s the rate at which individuals have been net sellers of shares owned directly has increased, while more people have been putting money into shares through unit trusts. The latter attracted very large support in the 1960s when there was a steady increase in stock market prices. However, unit trusts are allowed to invest only in “quoted securities”, which in practice means shares and, to a small extent, fixed-interest securities, although these are disadvantageous tax wise. By the late 1960s it was realised that a pure equity investment via a unit trust was not what every investor wanted; many would prefer a more diversified investment embodying less risk.Unit trusts were unable to fill the above-mentioned need because of legislative restrictions, but a number of individuals involved with unit-linked insurance realised that they could do so. Critical illness insurance companies have far less restriction on their investments than unit trusts and may invest in shares, property, fixed-interest securities and even in unquoted securities (i.e. shares of companies which have not yet achieved a stock market quotation). The unit-linked offices were therefore able to launch funds similar to unit trusts investing in these different types of assets.

The cash value in a critical illness insurance policy is invested by the company through its general investment portfolio. In contrast, universal critical illness insurance policies have the cash value component invested in separate accounts. Critical illness insurance policies are either participating or non-participating. A participating policy charges a higher premium and in return pays regular dividends to the policy owner. Non-participating policies pay no dividends and premiums are usually lower than participating critical illness insurance policies. Dividends can be utilized in several different ways. Dividends are not guaranteed and depend on the company’s actual experience with the book of in force business.

Dividend options include cash, purchase of fully paid-up critical illness insurance in small increments with each dividend, reduction of the next premium payment, retained by the company at interest, and the purchase of one year insurance in an amount equal to the then cash value. The last point is the so-called fifth dividend option that was popular with critical illness insurance policy owners who wanted to maximize the face amount of coverage during the early in-force years. It is important to understand that dividends are bought and paid for when you apply for a participating policy. The trade-off for dividends is higher premiums.

Critical illness insurance policies usually included the automatic premium loan feature that would allow the company to pay the overdue premium payments by making a loan from the cash value. The distinguishing feature of the critical illness insurance policy is its simplicity. Pay the premiums on time and the policy will pay off when a claim is accepted. The main disadvantage of critical illness insurance is its premium payment which may be higher in some cases. If the policy owner is unable to pay the premiums due to job loss or other circumstances, then the policy will lapse. Policy loans are usually available but borrowing from a policy can lead to its eventual lapse if the loan is not repaid on time. Policy loans can be very complex and destructive factor to your insurance coverage.

Critical illness insurance is a complement to life insurance policies. A lump sum is paid to someone suffering a specific critical illness and survives. Then you decide how to make use of the money received.

People who smoke are eligible for critical illness insurance. However they need to pay more. Age, gender and family history are factors that are considered to determine the premium. Men generally pay more as they have higher incidence for illnesses.

Hereditary disease can render someone ineligible to buy coverage for that illness. People who have HIV or those who are overweight can also be ineligible.

 Once someone has a heart attack, stroke or any other illness, the person will be paid out and the policy will end. The person may not be able to buy such a critical illness policy from another company for that specific disease. Some companies might allow you to buy critical illness coverage but that will exclude any serious disease the person faced before.

 Modern science knows how to make people live longer. Life expectancy is now longer than 70 years. Many people are unaware of the average age for a critical illness which is of 43. Reaching the age of 65 to 75, the policy will terminate. Some of the insurance companies have special rules regarding the age limit.

 Critical illness insurance does not apply for only individuals having a family but also for businesses. Since most of the time there is more than one individual in a business and most businesses require huge capital investment, critical illness insurance will turn out to be of major concern. Knowing the health of partners will affect the business’s day to day running, such illness coverage provides not only financial security but also quality medical care which will speed up the cure of the sick.

 For this reason, critical illness insurance still keeps its popularity in the insurance market. People are aware about the invaluable benefits and peace of mind critical illness insurance can provide. So, purchase critical illness insurance while you still have plenty of time.

Critical illness insurance could be vital especially during the times that you are suffering from a life threatening illness. With critical illness insurance making a payout, those who care for you could be assured that you would receive the required treatments. However, before taking out a particular critical illness insurance scheme, you may have to look at the several conditions covered. This could be a wise thing to do as the list you would come across may indicate clearly what critical illness conditions the policy covers.

In other words, your insurance company may not award any benefits if you suffer from a disease that is not mentioned in your policy. That is why, reading your critical illness insurance policy documents attentively could be an essential thing to do. Also, if you are considered as a high risk by your insurers, for instance, you smoke; you may encounter some difficulties obtaining critical illness insurance. On the other hand, some insurers might offer you critical illness insurance but your premiums may be higher than usual.

Moreover, cases of non disclosure may lead to a significant amount of critical illness claims being rejected every year in the UK. So, at the time you make the application for critical illness insurance, be sure that you relate everything concerning your health to your insurers.

So long as you are open and honest when the insurance providers ask you for any information this will ensure that there is no risk of you not recieving a pay out when claiming on the policy.

Taking out a Critical Illness policy means that in the event of suffering from a critical illness you would be paid out a lump sum of which would have been chosen at the start of your policy.

There are many different options to choose from when deciding upon taking out a critical illness policy. For example you can choose whether to take out Level Term Cover, Mortgage Protection Term Cover, Renewable Term Cover, Family Income Benefit Cover. There are also additional options you may add to your policy, such as indexation, total permanent disability, premium waiver, indexation, and reinstatement.

You need to know how much insurance you want to be covered for, The more cover you want for a longer term the more the premium will be. The amount is fixed unless you choose a mortgage protection term in which case it will decrease.

You will need to answer all questions on the application form to the best of your knowledge as if failure to do this may mean the benefits will not be provided by the policy.

The premium charged is dependent on the amount of cover you want, your sex, medical history, age and whether you smoke or not.

There premium can also be guaranteed or review able. Guaranteed is for the life of the policy, Review able is looked at every five years it can stay the same, go up or go down. This depends on the companies assumptions re claim costs, investment income etc.

There are two main types of critical illness insurance. These are known as reviewable and guaranteed premiums. A guaranteed premium is on that will not ever change during the chosen term you wish the policy to run. The only time you will see an increase in a policy that it guaranteed is if the benefit is set to increase with RPI (Retail Price Index) every year.

A reviewable premium is cheaper than a guaranteed one at first. The policy premium will get reviewed ever 5 years. At this stage the policy may go down, stay the same or go up a little bit. The premium change will not be down to the clients health changing or anything such as this but the claims history of the company concerned. If the company has had more claims than they have budgeted in the previous 5 years then there is the possiblity it could go up a little bit. If the history is constant the premium is likely to remain the same and if it is less then the premium could also go down.

Reviewable premiums are becoming more and more popular as with experiance the insurance providers are getting their calculations more and more accurate. Thus predicting the claims history correctly from the outset.