Money Saving Blog

Income Protection Insurance is a form of insurance policy, which is designed to provide financial assistance to someone who is rendered unable to work for an extended period due to disability or illness. The money paid out by this form of insurance is entirely tax-free and, if you take out an Insurance Protection policy that you subsequently need to draw on, it will pay out a proportion of your earnings until you are either able to return to paid work or you retire. The purpose of this type of insurance cover is to provide longer-term protection to those who are placed in a vulnerable position due to being unfit for work.

Why should you consider Income Protection?

Many people will feel that taking out an Income Protection policy is superfluous, particularly if they already have critical illness cover. However there are key differences between these types of insurance – principally in the length of time that they last. Should someone suffer long-term illness – for example, paralysis that left him or her unable to do their job – this would not be covered by a critical illness policy. Furthermore, Accident Sickness Unemployment cover would offer financial protection for the initial period that they were in hospital, but would not continue beyond that point. Income Protection Insurance will provide you with financial security for as long as you require it. There are a number of other medical conditions that are not covered by Critical Illness policies – such as mental health issues – that also make considering an Income Protection policy worthwhile.

How does it work?

Income Protection works in a similar way to most other forms of insurance, with premiums being paid on a monthly basis, but there are factors that will help to determine exactly how steep a person’s premium will be. The first of these is age – with older people paying larger premiums as they are considered at higher risk of illness. Another contributory factor is that of a person’s health at the time of taking out the policy, as obviously someone with a history of illness may either be refused a policy or asked to pay a higher premium. Then there are the issues of the job and hobbies a person has, as the level of illness or injury risk these carry will also have an effect on how high their premiums are. Finally there is the matter of the waiting period: Income Protection carries a delay before paying out to claimants, but the claimant can choose the length of the waiting period. The longer waiting period they opt for, the lower the premium will be.

If you are sitting down with your ipad, diary, phone or calendar make sure you include these 4 key financial dates for 2012 as there are a few financial changes taking place this year.

1. January Tax Deadline

If you are self employed, or have income coming in from more that one source then you need to complete a tax return online by the 31st of January. It is important to note that even if you don’t owe any tax – but need to complete a tax return you will be fined £100 for not completing it in time. The deadline for completing by paper was back in October so you need to complete it online at the HMRC website.

2. End of Stamp Duty Holiday for First Time Home Buyers

If you are buying your first house you have until late March if you want to avoid paying Stamp Duty Tax.

So if you are looking to make a saving then you need to start looking now. However one of the biggest problems first time buyers face is not finding something in time, it is having a large enough deposit to secure a competitively priced mortgage.

The government has announced that they will be launching a government sponsored 95% mortgage on new build properties. The date is not finalised as yet, but suggested to be 2012.

3. Protecting Your Lifetime Allowance

From 2012 the maximum you can save into a pension will fall from £1.8m to £1.5m, however if you are retiring or near retirement you can protect this benefit by applying to the HMRC by the end of 2012. This change will also affect people on a final salary pension too of £75k or more.

If you don’t apply for this ‘protection’ you will find pension savings above £1.5m are taxed at 55%.

The sting in the tail is that even thought you will be avoiding additional taxes you will lose out on contributions from your employer which could be worth more than the tax decution, like a substantial pay rise.

4. Contracting out of Second State Pension

2012 is the last year that UK residents will be able to contract out of SP2 (previously known as SERPS). If you wish to opt out you will get a refund of part of your national insurance contributions to invest directly in a personal pension rather than receiving an earnings-related state top up instead.

If you want to contract out you need to complete a CA1542 form. If you already have a personal pension you can ask your provider to send the form to you.

Living life is expensive, that much is true, whether saving for education, weddings, mortgage deposits, pensions or something else financial planning is always a good idea and will help you in the long term. There are also occasions in life that cannot be planned for and having a nice nest egg tucked away will fill you with confidence should something unexpected happen. If you want to build a financial plan but do not want to have to fuss around building spreadsheets and working out percentages then consider MoneyVista as the perfect website for you!

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This will then allow a detailed financial plan to be built that will show at a glance what your financial situation looks like, what you have going out and what kind of return you can expect on your savings. Tax and national insurance will also be taken in to account when building your finances up so that you can expect an accurate picture at all times. It is very simple to make changes on MoneyVista.com and see in just a few seconds how these changes will benefit you now and in the future.

You will never be asked to provide passwords or account details so you can rest easy knowing that your investments and savings are as secure as ever. As the website is updated often it is very simple to feel confident that your financial plan is up to date and accurate. Any chances in tax and national insurance are swiftly dealt with also, regardless of when they happen, and whatever financial purpose you want to use MoneyVista.com for you will find the website simple and easy to use and you can even see accurate details of percentage returns on savings, properties and much more, however, if for some reason you disagree with the figures or you know of something that will be different then it is very simple to edit these percentages yourself to give a more accurate overview.

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