Posted by & filed under Critical Illness Cover, Income Protection, Life Insurance, Protection - Insurance.

When you’re fit and healthy and feeling secure in your job, it’s hard to imagine anything going wrong. However, serious illnesses, death and other reasons that render you unable to work can always unexpectedly occur. So if anything did go wrong, how would you fare?

If you don’t have insurance in place, these are the types of questions you’d be thinking about:

• Would you still get the level of income you (and your family) are used to?
• Could you still afford to pay your monthly bills, your loans and most importantly your mortgage?
• How would the loss of income affect your family?

Here at Credius, we have access to a variety of options to help you secure you and your family’s financial future.

Throughout this 2-part article, we’ll be providing you with the information you need to make an informed decision about how best to protect you and your loved ones if something does go wrong.

From Life Insurance, to Business Protection and Critical Illness Cover to Income Protection, we’ll guide you through what each cover actually means, how to calculate the levels you’ll need and how you can get the right, all-round protection for you, whilst keeping your premiums down.

We’ll also look at the application process, your obligations to the insurance company and when you need to review your policies.

So whether you’re fit and healthy and feeling secure in your job or you’ve got concerns on the horizon, this guide will help you guide you towards the right decisions to provide you and your family with peace of mind knowing you’ll be financially secure should the future not turn out as expected.

Life Insurance – What you need to know

Life insurance is something many of us would never dream is relevant to them. I mean, it’s not like we’re going to die any time soon is it?

Well – not wanting to state the obvious, but none of us really know when we’re going to die. It could be in 50 years’ time or equally it could be next week (we’re sorry to be the bearer of such gloomy news).

Either way, it’s never nice to think about it but that doesn’t mean we shouldn’t.

Life insurance is a vital part of financial planning for anyone who has dependents. By ‘dependents’, we’re referring to those whose circumstances and material well-being would be affected by your death. So that means your partner, your children or anyone else who is financially reliant on you.

It can make the difference between your loved ones struggling financially and maybe having to move home or them being able to pay the mortgage/rent and maintain a similar standard of living while coming to terms with your death.

So how does life insurance work?

Life insurance comes in a variety of forms. At its simplest, it pays out an agreed amount, either as a lump sum or as a regular income if you die within a specified period, known as the ‘term’. Hence it is often called term insurance and this term can be anything, typically from a minimum of 10 years upwards.

Just like with any insurance, you will need to choose a level of cover. Remember, this is the amount you’re dependents will receive if the unthinkable happens so make sure it will cover all the bills and allow them to live comfortably.

Most policies will have some exclusions. For example, they may not pay out if you die due to drug or alcohol abuse, and you normally have to pay extra to be covered when you take part in risky sports so it’s important to check the small print.

If you have a serious health problem when you take out the policy, your insurance may also exclude any cause of death related to that illness.

One last thing to remember is that life insurance is just that, it’s insurance for your life (or lack of it) and will not cover you for illness or loss of earnings in any other circumstances.

Lowering the cost of your life insurance

The cost of your life insurance, known as the ‘premium’, can depend on a range of factors including your gender, age, existing health conditions, family medical history, your weight and of course your smoking status.

It goes without saying, if you smoke, your premium is going to go up, but it’s worth noting that if during the life of your policy you quit smoking (and remain a non-smoker for over 12 months) you may be able to revisit your policy and have your premium revised. The key message is live a healthy lifestyle and your premiums will be lower.

Generally, applicants who are older will also pay a higher premium so it really pays to take out life insurance at a younger age.

There are three main types of life insurance – level term, decreasing term, and whole-of-life. So what’s the difference?

Well, the first two require you to state a number of years over which your policy will cover you whilst the latter covers you for the duration of your life. Clearly the shorter the term, the cheaper the overall policy will be – however this can be a false economy, because if you chose to take out another policy when your first one ends, you’ll be a good deal older and your policy will be more expensive as you’re deemed “at higher risk of death” (morbid – we know!).

Level term assurance means that if your policy covers you for a £500,000 payout when you buy it, it will still cover you for that amount in 3, 5, 7 or 10 years times, whatever the duration of your policy is.

Decreasing term assurance could bring your premium down significantly. This means the value of cover will decrease in line with your expecting debts during the course of the policy. Perfect if you simply need to make sure there is enough to pay the mortgage off.

Get value for money

If you are a couple, there is another relatively simple measure to greatly improve the value you can get from your life cover.

Couples are often offered joint life insurance policies. This means the policy pays the same sum if either of them dies. However, this is only suitable if both parties need the same level of cover.

What’s more, the price of joint cover is often only slightly cheaper, if at all, than two single life policies with the same sum assured for each. Taking out two separate policies instead of a joint policy means that, if the very worst were to happen and both parties died, any dependents would get twice the pay-out.

Ultimately, the best way to get the most for your money and ensure you have the right cover for your needs is to speak to a financial adviser who will have hundreds of products at his or her fingertips and can direct you towards the right direction.

Critical Illness Cover vs Income Protection – What’s the difference?


Given the world of uncertainty we live in, unexpected events can suddenly happen, rendering us unable to work at any time.

Therefore, deciding how to protect your finances and lifestyle from the risk of sickness or injury should be pretty high on your “to do” list. But with a range of policies out there which protect against loss of income due to illness, how do you know which one is right for you?

The two main policy types are Critical Illness Cover (CIC) and Income Protection and whilst both of these policies are designed to pay out if you fall ill, the criteria you must meet for a pay-out and the manner in which the payout is made varies. Let’s first consider CIC.

CIC provides the insured person with a lump sum payment if they are diagnosed as suffering from one of a range of critical illnesses. The important thing to note here is that it will only pay out for specific illnesses and these will be listed on your policy (normally it’s a list of 40-50).

This list is largely determined by the Association of British Insurers Statement of Best Practice and covers such illnesses as cancer, stroke, heart attack, kidney failure, major organ transplant, multiple sclerosis and coronary artery bypass surgery.

As with life insurance, you determine the level of pay-out you would like to receive if you need to claim and you choose a length of the policy.

Now let’s compare this to Income Protection. Rather than paying a lump sum, this type of policy covers your earnings from the risk of sickness or injury and will pay out a monthly benefit of up to 65 per cent of your gross income.

It is a long-term plan providing protection all the way up until you retire, or when the term of the policy ends, whichever is sooner. In addition, and multiple claims can be made throughout the life of the policy. One of the great advantages of income protection insurance is that it covers you for practically any illness or injury that prevents you from working.

So which one is right for you? Well, it depends on your situation and your needs and believe it or not, many people will opt for both.

Income Protection: Everything you need to know

income protection insurance IFA london

As we mentioned previously in this article, Income Protection will provide you with a % of your regular monthly income if you are unable to work through critical illness or injury.

Because everybody has different needs and different risk levels, insurers will require some detailed information from you to be able to provide the cover you need and this information will naturally affect the price of your premium. Here are a few things they’re likely to ask.

How long you would like your policy to run for

Typically this is through to retirement but a shorter policy is likely to reduce your premium

How much you would like to be covered for

Insurers are happy to cover you for almost any amount you wish. So if you say you currently have a £200k salary, that’s what they will cover you for. But be warned.

Regardless of how much you are covered for, in the event of a claim you will have to produce documented proof of your income and if it is only, in fact, £20k, regardless of the level of cover you purchased – you will only be paid a % of your real earnings.

Whether you want your cover to rise in line with inflation

This is a great idea, especially if the length of the policy is significant

The waiting period

The waiting period dictates how long after an accident or commencement of illness you would like the policy to kick in and beginning to pay-out. Obviously the longer the waiting period, the lower the premium is likely to be.

Your occupation

All occupations are graded as to the risk they pose to illness, injury and even death and this will have a direct impact on your insurance premium

Your medical history

It’s crucial to give your insurer accurate medical history as in the event of a claim, any hidden conditions will be uncovered through the insurer’s investigations prior to a claim being actioned.

If you have an existing condition, your insurer may still provide cover for an additional premium.

Own Occupation

This is very important. Own occupation will pay out if your illness or injury prevents you from being able to carry out your main occupation (even if you could still work in a different role).

The alternative cover is “Any Occupation” which means you will only receive a payment should you not be able to work at all.

Some other important things to consider

IP does not cover you for pregnancy, redundancy or job loss, injury or illness relating to alcohol or drug misuse or pre-existing conditions (unless agreed).
Some insurers, however, will provide cover at an additional premium for redundancy.

Please note regarding redundancy cover:
Any form of redundancy cover is classed as short-term Payment Protection Insurance (PPI). Payment Protection Insurance is optional. There are other providers of Payment Protection Insurance and other products designed to protect you against the loss of income. Please click here for impartial information about insurance.

Income Protection can be a complicated topic and it’s important to really understand your needs before jumping into a lengthy commitment. By contacting Credius, we can provide expert advice and provide you with access to a portfolio of various products.

Income Protection for Company Directors

sme company director with income protection
If you’re a Director of a Limited Company and Income Protection or Life Insurance is provided as a company benefit, you may want to consider the following alternative policy types to protect you and your family financially.

• An Executive Income Protection Policy (equivalent to Income Protection)
• A Relevant Life Policy (equivalent to Life Insurance)

Both of these types of policies are taken out by the company itself to provide financial protection for the key personnel within the organisation.

One of the main differences with these policies and standard life or income protection insurance is that instead of it being your policy and any pay-outs being made to you, the policy is actually owned by the company and any pay-out will be made to the company.

The company is then free to use the funds however it wishes. In the case of Executive Protection, this would typically be paid to the individual in the form of sick pay as a monthly benefit. In the case of Relevant Life policy, a lump sum would be paid out to the family if the worst were to happen.

Critically then, where standard policies would pay-out to an individual tax-free, this payment is made to the company and so any payments made out to the individual from the company would be taxable income so it’s important to take this tax layer into account when choosing a level of cover for those on the policy.

“So what’s the point?” you might think. Well, there are real benefits to choosing these types of policies. Chiefly, instead of your policy premium becoming a taxable benefit on your payslip every month, it becomes an expense to the company that is tax deductible.

This means you pay less tax monthly than with a traditional company benefit and your company can write off the costs of the policy against their profits.

What about dividends?

Obviously, every policy provider is different, but if your dividends do stop in the event that you make a claim, it is commonplace for these to be included in any protection and ultimate pay-out. Insurers will need historical proof of dividends before determining a level and we strongly recommend speaking with your adviser upon taking out the policy to ensure the relevant cover is in place.

Credius provide expert advice and have access to a portfolio of various products to match the most demanding of requirements, contact us today to find out more about the insurance services that’s right for you.

Interested in learning more? Check out part 2 of this article!

Posted by & filed under Investment.

This is a beginners guide to investment funds. However, please note that the value of investments and the income they produce can fall as well as rise. You may get back less than you invested.

What are investment funds?

Funds are ‘pools’ of money from many different investors that are used to buy a range of company shares, bonds and other assets. By pooling money with other investors you can take advantage of investment opportunities more easily than if you bought the individual assets yourself. The pool of funds is managed by (surprise surprise) a Fund Manager and they will use their knowledge, experience and research to grow the collective pool of funds by buying and selling investments when the time is right.

Investing in a fund is different from investing directly in shares or bonds. Each fund takes a calculated approach and invests in a range of assets. That means they’re typically lower risk because the fund will normally be able to invest in a wider range of companies that an individual would typically be able to do. But handing over your hard-earned cash to a fund manager doesn’t mean you don’t have decisions to make. In fact, the main decision you’ll have to take is which fund to go within the first place. Funds can be focused on specific industry sectors, geographic locations and even asset types (for example – property). By asking for advice from a financial adviser, such as Credius, we can help in making the right decision for you, based on your current circumstances.

Clear objectives of these funds

• Deliver growth by investing in UK companies and emerging markets
• Generate income by investing in UK government bonds
• Deliver growth and income by investing in companies that pay high dividends


Points to consider when selecting a fund to invest in

And that’s not all – here are some other points to consider before making your fund choice.

Age of the fund

Do you want a fund with an established track record or would you rather get in early with a new fund launch? It’s worth remembering that past performance is not a guide to what might happen in the future.

Size of the fund

This indicates the fund’s popularity and past success at attracting investors. However, some funds can be so large it’s difficult for the fund manager to run it and that means it might be a less attractive investment. A small fund is sometimes easier to manage.

Fund manager tenure

Consistent fund performance often relies on a fund manager having managed it for some time. But watch out – star performers can change jobs.

Independent ratings

Companies such as Morningstar, Standard & Poor’s and Moody’s provide independent ratings for funds’ performance, creditworthiness and consistency of management and are a great place to research specific funds once you’ve narrowed down your search.

Charges

Look closely at all the fund charges and the penalties for withdrawing your money. Tiny differences in the percentage charged for fund management could cost you thousands, if not tens of thousands of pounds in the long run.

It takes time, experience, knowledge and skill to work out which fund could be right for you. To help you make a decision, it’s beneficial to understand how the fund you invest in, gets managed.


How are these funds managed? – Active vs Passive Funds


Now after giving you a brief introduction to what a fund is. We’re now going to talk about two different ways that your fund can be managed. This is something that you’ll need to take into consideration when choosing a fund. Funds can be managed actively or passively so let’s take a look at what that means…

Actively managed funds

Actively managed investment funds are run by professional fund managers or investment research teams who make all the investment decisions such as which companies to invest in or when to buy and sell different assets on your behalf. They have extensive access to research in different markets, sectors and often meet with companies to analyse and assess their prospects before making a decision to invest.

The aim with active management is to deliver a return that is superior to the market as a whole or, for funds with more conservative investment strategies, to protect capital and lose less value if markets fall. An actively managed fund can offer you the potential for much higher returns than a market provides if your fund manager makes the right calls.

Passively managed funds

‘Passive’ tracker funds still have a manager, but the underlying investments are selected automatically in line with the fund’s objectives. Most passive funds track an index like the FTSE 100 or Standard & Poor’s 500 (S&P 500) but the aim isn’t to beat it, it’s simply to match it. To achieve this, the fund will usually invest in all the parts of the market sector. So if the relevant market sector falls or rises by 30%, the fund should too. The charges for this type of fund tend to be lower because there’s less day-to-day management involved.

So why choose passively managed funds – surely if you want to make money, having an actively managed fund is a no-brainer?

It’s easy to think that but the reality is that few active fund managers are able to consistently outperform the markets they aspire to beat. Even if you choose a fund that has consistently out-performed the market in previous years, there’s no guarantee it will do it again in the years to come, so whilst there is a chance that you could make significantly more money with an actively managed fund, that chance is matched by the risk of your fund not performing well at all.

One of the biggest drags on the performance of an actively managed fund is the costs. For the privilege of getting an expert fund manager, you have to pay much higher fees than you would with a passive investment fund. That means that not only does the fund manager have to outperform the market, but they need to do by a margin that is sufficient enough to swallow their fees and still leave you better off. For many managers, this proves too challenging over the long term.

Having said that – actively managed funds wouldn’t exist if there weren’t some winners so don’t rule out the option before finding out more.

Click here to have a look at our Investment page for further information on other forms of investments available.


Three popular Fund Classes – Unit Trusts, Investment Trusts and OEICs


So far, we’ve introduced you to the idea of funds and explained how different funds can be managed. Next, in continuing our journey, we’ll be looking at the three popular classes of fund – Unit Trusts, Investment Trusts and OEICs.

Unit Trusts

With a Unit Trust, a Fund Manager pools money from many investors and buys bonds or shares in companies on the stock market on behalf of the fund and will make all of the decisions around what to buy, what to sell and when to do it. The fund is split into units… hence the name – and this is what you’ll buy (and perhaps sell). When investing in unit trusts, you buy units at the offer price and sell at the lower bid price.

The difference in the two prices is known as the spread and to make a return on your investment the bid price must rise above the offer before you decide to sell … sounds a bit confusing, doesn’t it?
It’s for this reason and complexities around the legal structure of Unit Trusts which have led to their demise in recent years, as they rapidly get replaced by their modern-day counterpart – OEICs.

OEICs (Open Ended Investment Companies)

OEICs (pronounced ‘oiks’) operate in a similar way to Unit Trusts except that the fund is actually run as a company in its own right. This means, instead of buying units in a fund, you buy shares in the OEIC. When it comes to selling your shares, it’s a far less complex affair when compared to selling units in a trust. Whatever the share price is on the day of the sale, that’s what you’ll get… “simples”. OEICs also tend to have lower management fees.

Returns from both Unit Trusts and OEICs are paid through distributions which can be monthly, quarterly or every six months, depending on the type of fund that you invest in. These distributions derive from the dividend payments received by the fund from the underlying shares within which they invest, or interest payments from bonds or even rental income in the case of property. It goes without saying that the fund manager will take their management fee before passing a distribution on to the end investor (you).

Investment Trusts

Investment Trusts are the elder statesman of the investment world and have been around since the late 1800s. Like an OEIC, an Investment trust is set up as a company – however, the big difference is that the company is floated on the London Stock Exchange. As with any company quoted on the stock exchange, investment trusts have to publish an annual report and audited accounts.

They also have a board of directors to which the manager of the trust is accountable and which looks out for the shareholder’s interests. When you invest in an investment trust, you become a shareholder in that company and that means you’ll get paid a regular dividend based on the company’s performance.
Investment trusts can be appealing as they generally have lower annual charges than unit trusts and the potential for higher returns. They can also invest in a wider range of securities.


Identifying the right fund for you


So how do you know which type of fund is right for you? Well, with so many variants of a fund to choose from, the best place to start is by speaking to a qualified professional such as a Financial Adviser for advice that’s right for you.

Here at Credius, we’ve got a great team ready to help you – so why not call us today on 020 7562 5858 or email us at info@credius.com. We’d love to hear from you.