New research from Scottish Widows has found that an estimated 28 million Britons have no Financial Plan should the worst happen to them.

The research shows that these Britons risk leaving their families in a vulnerable financial position due to their lack of life insurance.

Market director of protection from Scottish Widows, Clive Allison revealed that his company’s poll of over 5000 adults in the UK revealed that a large number of adults are continuing to ignore the risks associated with not having a financial plan for their love ones.

Products such as life insurance, income protection and critical illness cover are often overlooked by adults living for now and not worrying about the future.

Over half of those surveyed did admit that they reviewed their finances at least once a year, but the survey showed that in reality many chose not to act on their findings.

Allison explained, “We realise that many people do not like to plan for the unknown but the importance of doing so cannot be underestimated.

“Our research shows that the majority of people clearly understand the benefits associated with protection products such as life, critical illness and income protection, but that many still do not adequately protect themselves, their families and their homes.

“The industry still needs to do more to highlight these benefits to ensure take-up increases, especially in an environment where welfare provision is being eroded and the government is promoting the need for greater self-reliance.”

Even more surprisingly were the statistics relating to life insurance, where 97% of those surveyed were aware of both its existence and its importance but only 44% actually had any life insurance.

Critical illness cover had an even worse take up with 86% aware of the need for it, but only 12% of those asked actually having a policy.

Income protection had an 83% awareness but only a 7% take up showing that many Britons are aware, but are simply choosing not to take out such policies.

The study also revealed that 58% of Britons have less than £2500 of savings, suggesting that the 43% of people who said they would use their savings should the breadwinner have their income cut may not be able to survive for long.

Choosing critical illness insurance is a complex issue these days, with so many critical illness policies and so many providers on the UK market. Our expert advice team checks the product ranges of all the leading providers on a regular basis, in order to locate the best critical illness policy for you.

Here are a number of the features they have highlighted, that differentiate the various critical illness policies currently available.

Free children’s critical illness insurance: most of the leading providers now include free critical illness insurance cover for your children, varying from £15,000 to £25,000 per child, depending on the policy. Skandia allows 2 parents with single policies both to claim for their sick child, doubling the cover to £50,000.

Index-linked or increasing cover: some providers such as Bright Grey offer the option of cover that increases each year, to offset the effects of inflation on your payout.

Regular income options: while a critical illness insurance policy usually provides a tax-free lump sum payout, some policies offer a regular monthly payout instead, providing a ready ‘replacement salary’ if you lose your income due to illness.

Waiver of premium: LV is one of the providers which will take over payment of premiums on your critical illness policy for a time, if you stop work due to accident or illness.

Severity-based cover: Prudential offers reduced payouts for milder forms or instances of certain illnesses, thus maximising the chance that the policy will pay out.

Free cover during application: Scottish Provident offers free critical illness cover while your application for a policy is being processed.

Decline renewal of premium option: Zurich offers policyholders with renewable cover the option to decline an increase in premium, and accept a reduction in cover instead.

These are just some of the options our critical illness team can explain, when providing your critical illness insurance quote. For further details, refer to our critical illness insurance providers page.

Time is running out for small businesses. Only 18% of small businesses have key man insurance to cover the death of a key employee, despite the fact that two thirds of businesses recognise and fear this possibility, according to Scottish Provident.

The vast majority (65%) of companies agree that the death of a senior employee would have a ‘severe impact’ on their business, with over half (57%) also accepting that the business would be severely affected, if a key employee were out for just six months, due to serious illness. Again, only 18% of small businesses have planned for this eventuality, by taking critical illness cover within a general key man insurance plan.

With key man insurance, policies are taken out, not for the direct benefit of human beneficiaries, but to offset the costs of tragic events for a company or business.

The reasons for taking key man insurance are proven by the figures: in a small business with 4 key male employees, there is a 29% chance that 1 of them will die before retirement, and a 68% chance that 1 will suffer a critical illness, according to Scottish Provident.

Key man insurance (also known as keyman insurance, key person insurance or keyperson insurance) can secure the stability of a business in adverse situations, in a variety of ways.

If a director has given personal guarantees on a loan to the business, for example, key man insurance cover, paid by the company to insure the director’s life for the amount of the loan, means the business can repay the loan, with no impact on profits, if he dies.

In partnerships, key man insurance comes into its own in unexpected buyout situations. If each partner has both a critical illness insurance policy and life insurance cover, and a tragic event (either critical illness or death) occurs, the key man insurance can enable the other partners to buy the partner’s share of the company, with no impact on the company’s reserves.

The Aviva COTS (Cost of the Sibling) study found that with the cost of childcare for 2 children now almost £16,000 a year*, many spouses would be working ‘just to pay the childminder’ in the event of the death or loss of income of their partner. The only option would be to survive on state benefits, if no life insurance cover and critical illness insurance were in place.

For many 2-child families, the cost of childcare has already made it unattractive for both partners to remain at work, after the arrival of the second child. In Aviva’s study of 1,000 parents with 2 children, 4 in 10 families felt that continuing to work was an unworkable option and one which will be even less so, with the loss of Health in Pregnancy grants and other benefits in the June 2010 budget.

*Full-time nursery place for child under 2 typically £152 per week or £7,900 per year

Taking as an example a person disabled by a stroke, the costs of converting their home to deal with this tragic situation would require over £3,200 on day one. This is simply to facilitate basic functions such as access, mobility, and continued independence within the home. Additional costs for medical treatments and carers would follow later.

Costs of all items below are based on actual products currently available on the market.

A motorised wheelchair would be required straight away, to allow the person freedom to leave the home when they so desire. As of today (June 2010) a basic model would cost £455.

In order to negotiate a step in the garden path, 1 x 2ft foldable access ramp: £95.

In order to have access to the upper floor of the house: 1 x motorised stair lift: £895

Use of toilet: toilet frame with integrated designed seat: £87

Personal bathing: in order to lower and raise the disabled person into the bath: 1 x electric bath seat £581

For rest day and night: hand-controlled position-adjustable electric bed frame: £1,168

This gives a total of £3,281 for indispensable items that would be immediately necessary for independent, day to day living, following a stroke.

Critical illness insurance cover offers a tax-free lump sum payment when a person is struck down by a critical illness or health condition. Each policy has its own list of conditions covered and its own exclusions. Understanding the ‘small print’ is particularly important, as exclusions may have a direct effect on critical illness insurance claims.

This makes critical illness insurance a product best purchased with unbiased financial advice from an independent financial adviser. Many customers can achieve a saving by taking a combination of life and critical illness insurance as a ‘bundled’ product.

Some of the ancillary benefits now included in life insurance cover and critical illness insurance can be a
considerable factor in deciding which policy is best for you.

For new parents, for example, Aviva is now offering free life cover of £10,000 to those who contact the company before their child is 6 months old. The free cover then runs until the baby’s first birthday.

Many of the larger insurers, including Aviva and Prudential, include cover for your children, when you take out a critical illness insurance policy. This provides your children with critical illness insurance free of charge until they turn 18. Around 2% of claims for critical illness relate to children, and policies generally include conditions often associated with the young, such as leukemia.

Staying with the area of criticial illness insurance, LV= offers critical illness and income protection customers
who make a claim some attractive options, once their claim is complete. Their Extra Care service offers customers oncology, cardiology or neurology care, as well as access to therapeutic, physio or counselling expertise.

Those who buy life insurance cover through Scottish Provident are also offered the Lifeline service, which offers access to experts giving life and health-related information relating to legal issues, employment, and counselling services.

Bright Grey offers its Helping Hand service, which give customers access to a personal nurse adviser. This advice is also available to your partner and children, even if you have divorced since taking out your life and critical illness insurance policy.

Aside from pure life and critical illness insurance, there is another useful option for parents contained in the income protection insurances by Royal Liver. A lump sum of four times your gross monthly income protection benefit (up to £25,000) is available to parents who want to give up work to care for a seriously ill child.

Insurance specialist LifeSearch, which highlighted these optional services, pointed out that ‘a good financial
adviser will be able to identify the most suitable policy for a client that many direct sellers just don’t have the expertise to do.’

PruProtect has introduced a new personal insurance product which combines critical illness insurance with private medical insurance.

Critical illness insurance provides a tax-free lump sum payment when the policyholder is stricken by a defined range of critical illnesses, from a long list including heart attack, stroke, cancer, or multiple sclerosis. While some insurers have traditionally demanded that some illnesses must be of a strictly defined severity in order to validate a claim, PruProtect’s Serious Illness Cover acknowledges extreme or mild severity, and makes a proportional payout in either case. In other words, claimants for a very mild heart attack may still receive a payout, albeit for a smaller amount, where other insurers would have completely turned down their claim. The product is seen as more customer-friendly, as it is less likely that claims will be turned away.

Now PruProtect offers a combination of this critical illness cover with Pru’s Private Medical Insurance (PMI) cover, and at a discount of 25% on the private medical cover, when taken in the bundled product.

The ‘Health Cover Optimiser’ policy offers cover for a critical illness but also for medical or hospital costs. Customers can take either a lump sum payment for a qualifying critical illness, and receive no costs from the private medical insurance, or they can take a smaller lump sum from the critical illness cover, and use the rest towards their hospital costs.

Are you properly insured to replace your income for your loved ones, if you have to give up work? Use our simple critical illness planner to check how much you would need, contact us online with an insurance enquiry or ring freephone 0800 678 5929 now

This will relate to higher earners who earn more than £44,875 (i.e. who have taxable income of more than £37,400). For those paying the basic rate of tax, CGT will remain unchanged at 18%.

The Capital Gains Tax tax-free allowance of £10,100 will remain unchanged by the budget changes.

Capital Gains Tax applies, not to the full value of an asset, but to the gain or profit made from that asset – in other words, to the increase in its value from buy to sell. For instance, a house bought for £150,000, which you sell today for £250,000 would be taxed on your gain, or profit, of £100,000.

Budget Changes in CGT could affect shareholders

Today’s budget changes raising Capital Gains Tax to 28% will also hit the profits or gains made by those selling shares in the company where they work. This would affect the many thousands of UK workers who are given company shares as part of their salary and benefits package.

Budget Changes to CGT will hit those with second properties

While primary residences, i.e. the family home, is exempt from CGT, it does apply to second homes, either holiday homes or homes bought by pension savers on a buy-t0-let basis, as part of their pensions and retirement strategy.

Will there be an exemption for elderly?

Under today’s budget changes with regard to Capital Gains Tax, elderly homeowners who move into care homes could face capital gains tax when later selling their home.

There are currently 380,000 care home residents in the UK, of which an estimated 1 in 4, or 155,000, are home owners, according to nursing home research group Lang and Buisson. Many elderly people hold on to their family home for several years when they move into care, in case they become well enough to move back home. As a result, a significant number have been in the care home for 3 years, before they decide to sell their family home to pay the continuing cost of care. Unfortunately under legislation introduced in the budgets of previous governments, they would be liable for capital gains tax on second property, as after 3 years their home is then deemed by HMRC no longer to be their primary residence. In effect, their home would have the same status as a second home or a buy-to-let property, at that time.

Capital gains tax on second property would apply in this case to homes that increase in value by more than £10,000 during the 3 years the owner is in the care home.

Do you have questions about today’s budget changes or Capital Gains Tax? Contact our dedicated Budget Help Desk via an online financial advice enquiry or ring freephone 0800 678 5929 now.

Budget proposals that threaten an increase from the current 18% Capital Gains Tax to a possible 40% or more would give the UK the highest level of Capital Gains Tax in the world. These budget changes are likely to hit entrepreneurs and business, despite government assurances that they would be protected, said the British Chambers in their submission to the Treasury ahead of next week’s budget changes on 22nd June.

Capital Gains Tax applies to gains from sales of assets, including private investments and gains from stocks and shares, and also to gains from sales of second properties and buy to let properties.

The British Chambers of Commerce cast doubt on government’s capacity to distinguish between private and business assets in relation to Capital Gains Tax, and also stated that in a survey of Chamber members, over three-quarters of businesses were concerned about the negative impression that hikes in Capital Gains Tax would send out to potential investors. With a 50% top rate of income tax and a possible 40% rate of Capital Gains Tax, Britain is sending out a message that it is a high-tax country, said British Chambers of Commerce spokesman Sam Turvey.

Britain’s rate of Capital Gains Tax of 18% is already higher than the average rate in other countries of 15%, while countries such as Austria, Belgium Switzerland and Germany have no such tax at all, said the BCC.

In addition to these increases, the budget proposals also include government cuts in the Capital Gains Tax allowances. While the first £10.100 of capital gains is currently tax-free, government budget cuts may reduce this to £2,000 on June 22nd.

Any budget proposals for government cuts in this area are expected to be implemented without delay, rather than being held over until 2011 or later.

The cost to employers of providing life and critical illness insurance, and income protection insurance, in their employee benefits packages looks set to rise steadily over the next two years, according to a new survey by Aon Consulting.

The costs of life and critical illness cover have fallen over 2008/09 but only 12% of those insurers surveyed by Aon expected to be able to lower the cost of their lump sum life insurance cover this year – compared with 50% who expected to be able to lower their premiums last year.

Looking specifically at critical illness insurance, Aon found that not a single insurer expects the cost of critical illness insurance to fall in the short term, while 29% are expecting to raise their costs.

For death in service pensions the situation was similar, with 29% of insurers predicting they would have to increase their rates.

Income protection insurance produced the most emphatic response of all, with 50% of insurers surveyed saying they would certainly have to increase their rates.

The situation is unlikely to improve as insurers move towards 2012, when the introduction of the Brussels-driven Solvency II initiative will force insurance companies to increase their cash reserves. Solvency II has been passed in order to strengthen the general standards of capital adequacy, and provide a more stable business environment for all European buyers of life and critical illness insurance, and income protection insurance products.

“Employers and employees have had a relatively good ride recently, with the cost of some of the most basic employee perks decreasing. However, this year we are seeing more consensus amongst insurers that costs are likely to increase,” said Paul White, head of risk benefits consulting at Aon.

Aon Consulting’s annual survey of insurers and reinsurers covered companies with a combined group risk market of £1.5bn.