Insurance World

Critical illness insurance offers cover for certain specified conditions such as cancer, heart problems, kidney failure, loss of limbs, etc., The cover is quite simple and straightforward, in that if you are diagnosed with one of the severe illnesses listed in your policy a payment is made. On average 35 conditions would be considered as falling into this category with most companies. There is just one company, Virgin, who vary the cover by offering severity-based payments when cancer is diagnosed. Obviously with an illness such as cancer, there are various degrees of severity and with increasing success rates in the treatment of this disease; this seems a fair way of dealing with the situation.

The Financial Services Authority are not certain that people realize the limitations on the number of severe medical conditions covered by their policies and that they could be in for a nasty awakening if they assume that every serious illness will be covered.

With this in mind, the Prudential have brought out a policy which lists 140 severe conditions, which will be covered by their plan. Rather than the “black and white” decision made on diagnosis, this promises a grading of the payout according to the severity of the condition. A spokesman for the Prudential says the policy, named the Prudential’s Flexible Protection Plan, will mean that more payments will be made to insurers with debilitating illnesses, whose illnesses would otherwise be outside the scope of the insurance and who would then get nothing at all.

An improvement then on “black and white”, but could this leave a “grey” area instead? Apart from knowing that they are, in fact, likely to be paid out, the decision could be left open to argument regarding the grading of the level of severity of the condition: therefore consumers could be worried and confused about the final amount agreed. What insurers would grade as relatively minor may appear very different to someone newly diagnosed with a condition. It could be a case of accepting the fact that a smaller payment is better than nothing at all, but it could also be that the payment doesn’t match expectations. It would be advisable to make sure that you thoroughly understand the full implications and terms of the policy before considering taking cover.

Conventional critical illness cover, for a typical 30 year old family man, who doesn’t smoke would be around Ј24 per month, whereas it could more than double with this new plan.

It may be that critical illness cover is not the product for you. For financial security for your family, in the event of your death, life insurance would be the most important planning tool. To cover outgoings if you are incapable to working, income protection insurance could be useful. This offers cover for common ailments too, and not just the critical ones.

For advice and help on the type of insurances available, the easiest course of action is to find an internet broker, who’ll be able to answer your questions and come up with a range of quotes with a minimum of trouble to you and ensure that you arrange the insurance cover which is right for you and your family.

Many Americans are lucky enough to work for employers who provide some form of savings plan for the benefit of their employees.

Employer-sponsored savings plans can be an effective way to build a retirement nest egg. Through the benefits of tax-deferred compounding and, in many cases, employer matching funds, many people find they can save exponentially more through an employer-sponsored plan than they could on their own.

The 401(k) plan is the most well-known employer-sponsored retirement savings plan in America that serves those who work for corporations. There is also a similar plan specifically designed for state and municipal government workers, known as the 457 plan. For tax-exempt employers such as schools, churches or charities, there are 403(b) plans. Whether a corporate 401(k), government 457 or a 403(b), these plans are known as defined contribution plans, which means the money you’ll get out at retirement is defined based on how much you contribute.

The beauty of defined contribution plans is that you can decide how much to contribute (up to the IRS limit of $15,000 in 2006) and how the money is invested among the options available in the plan. While some people feel comfortable determining how to invest within the retirement plan on their own, many prefer having the guidance of a financial professional help them choose the investment options that are in sync with their personal investment strategies, time horizon and risk tolerance.

ING, one of the country’s leading providers of employer-sponsored retirement plans, points out the distinct benefits of employer-sponsored retirement plans that make building a retirement nest egg easier:

• Convenience of payroll deductions-your employer takes the amount of money you designate directly from your paycheck and stashes it into your retirement savings plan. For many people, this automatic feature helps them keep their retirement savings on track.

• Pre-tax contributions-your overall income tax is calculated on a lower amount, making your income tax burden a little lighter, and there’s more left in your savings plan to grow. You pay no income tax on contributions or earnings until your money is withdrawn. There may also be a 10 percent federal penalty for early withdrawal.

• Some employers match employee contributions, adding “free money” to your retirement savings.

• Workplace retirement savings plans allow contributions of up to $15,000, giving people who may be a little behind on reaching their retirement savings goals a chance to catch up a little quicker than they could by investing in a Traditional IRA, which does also offer tax deferral, but currently has a contribution limit of $4,000.

• Professionally managed investment options within the plan oversee the strategy, objectives and management of the underlying investment funds.

Another source of retirement income is an employer pension plan, but these types of plans are becoming less common in this new era of retirement planning. Known as defined benefit plans, where your lifelong income is defined based on the employer’s promise of a specific monthly benefit after retirement, pension plans are becoming more and more rare, because of the complexity and costs required and shouldered by the employer. Some employers still offer pensions, though-for example, many teachers are covered by employer-paid pension plans-but they are increasingly being phased out.

Without the big pensions of yesteryear, and with the future of Social Security uncertain, many retirees may find their plans for retirement income coming up short. Whatever employer-sponsored plan you have access to, you should give considerable thought to investing as much as you can, choosing investment options wisely, and monitoring and adjusting your investment options as your investment strategies or market conditions change.

Remember, your financial security is up to you.