Worry is Itself an Illness – Protect Against It – Death in Service
8th October 2017
A colleague was relaying a story about a close friend of his that has just been diagnosed with cancer. She is 51 years of age. She had been suffering symptoms for over a year, but ignored them as she helps care for her grand daughter. Her daughter suffers health issues and is reliant on 'Grandma' to help out. She is very much the matriarch, the hub of the family. She simply didn't have time to complain.
We all wish her a speedy recovery. I understand she is very strong and very stoic. We hope she will come through as her family need her. To add to her worries, financially she is very concerned, which prompted her contacting a member of my team. She is employed by a High Street bank.
She has the usual 'employee package'; Pension and Death in Service. Her employer has offered her full pay for the first 6 months (which is unusually generous) after which she will need to apply for Employment and Support Allowance. If she is lucky she may get the equivalent of Statutory Sick Pay, currently £88.45 per week.
She doesn't have critical illness, not many do. It is often deemed too expensive, especially when budgets are tight. Should the worst happen, God forbid, the Death in Service provides 4 times salary, which equates to £120,000. After the mortgage is repaid this leaves £40,000 for her beneficiaries - in this case her daughter. Here lies the worst perfect storm. This amount is insufficient to provide for her daughter and grand daughter for very long, but is sufficient to affect the daughter benefits until this sum has been diminished to circa £6,000 (DWP look at the amount on a case by case basis).
We will look to resolve this by altering her Will, so in the event of her death, any capital is left in Trust and not to her daughter directly. This should protect her current income. I would urge anyone with a life policy to ensure their plan is in Trust and remains relevant to their wishes. Although no one believes they will get seriously ill and meet a premature demise, statistics do not play out this belief. 7.5% of people in the UK do not reach their 60th birthday (ONS 2012) - that's almost 1 in 13 - unlucky for some.
Obviously, Death in Service is a valuable benefit to employees, but so often this is simply inadequate in the event of an early demise. In most circumstances additional cover is needed. For a 30 year old female, the cost of £200,000 life cover for 30 years would cost less than £10 per month. Even on a budget, this seems a small price to pay to protect not you, but your family. This premium is an estimate only and is based on a 30 year old female, in good health and a non-smoker. The policy is based on a level sum assured for a 30 year period. The actual premium will depend on individual circumstances.