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Family Protection

The cornerstone of your financial planning strategy will be to ensure financial security for your family in the event of unforeseen circumstances.

Illness, job loss or the death of a wage earner can plunge families into financial hardship. Taking a little time to assess your risks and calculate how much money would be needed to cover debts and provide your family with an income for the future could be the most sensible thing you do today.

As a rough guide, ten times the wage earner's annual income is considered sufficient. However, the actual figure will clearly depend on many variables including age, number of dependents, assets and liabilities.

Life Assurance

Life assurance is a policy that will pay out either a lump sum or a series of payments upon death. These payments are usually tax-exempt.

The proceeds from a life assurance policy can be used:

• to pay off a debt such as a mortgage
• to provide an income for your dependents
• to maintain the payment of school fees

Life assurance can be in the form of either a fixed term or a whole life policy. These can be combined with other forms of protection, such as critical illness insurance, which would entitle you to receive a lump sum if a terminal illness is diagnosed. Life assurance premiums can be paid monthly or annually.

Critical Illness

The benefit payable under critical illness cover is a lump sum payable on the diagnosis of one of several specified diseases listed in the policy. A wide variety of life-threatening and permanently disabling diseases can be covered. Different providers offer cover against different diseases and conditions. There may be a requirement that you survive for a period of 28 days following the date of diagnosis for the policy to pay out, as the policy is intended to cover living expenses.

The proceeds from a critical illness policy could be used to:

• Pay off a debt (such as a mortgage)
• To provide an income if you are unable to continue working

Critical illness cover can be provided as a stand-alone policy or as an option on whole life, term assurance, or endowment policies. If you decide to purchase one of these combinations you should bear in mind that you will only be able to claim if you contract an illness, as defined in the terms of the policy, and you may lose the life cover element unless you have purchased additional life cover.

Permanent Health Insurance

Permanent health insurance replaces income lost through long-term disability caused by sickness or accident. It is designed for those who do not require immediate income replacement. Income benefits do not start until the insured person has been absent from work for a defined period of time. The client determines this so-called deferred period when the policy is taken out. It usually ranges between four and fifty-two weeks and is determined by the length of time the insured's employer continues to pay full or half salary to employees who are too ill or injured to work. Income benefits continue until the insured person recovers and returns to work. Otherwise, benefits continue until the expiry date of the contract, death or retirement, whichever happens first.

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