Child Trust Funds: five tips on what to do with the money

1 September, 2020

Most of the around 55,000 young people turning 18 in September will enjoy an unexpected and worthwhile birthday present: the Child Trust Fund (CTF). This scheme was launched by the government in 2005 and the first funds will be available to spend or re-invest this year.

The average CTF will be worth over £1,000, but many accounts will hold significantly more than that. And while the temptation might be to spend the money on a car, a holiday or to pay off bills, recent research from OneFamily, the largest provider of CTFs, shows that most young adults are inclined to invest the money to build up a future nest egg.

Young people are also likely to look for help on what to do with the money from their parents, grandparents or guardian, so here are five tips on guiding them to make the right decision.

What are healthcare mutuals doing to create new value?

17 August, 2020

Insurers and cash plan providers are innovating in response to the pandemic, says AFM’s Martin Shaw in an article published in COVER Magazine

AFM statement on protection insurance and coronavirus, July 2020

Member organisations of the Association of Financial Mutuals assess each application for income protection on an individual basis, focussed on the applicant’s health, medical history and the severity of any symptoms at the time.  In reviewing an application, a mutual will ensure it complies with the Equality Act, to ensure the outcome of an underwriting decision is fair and appropriate.

Amongst AFM members, in 2019 more than 95% of claims received were paid.  For a mutual, underwriting is the first stage in the claims process: in other words, by taking care in the underwriting process to take full account of the medical history and circumstances of the individual at application stage, the policyholder can reasonably expect that a valid claim in the future will be paid, assuming the usual policy conditions are met.

Underwriting is a source of competition between insurers, and each develops its own underwriting philosophy based on its risk appetite.  As a result, in the early stages of the pandemic, many mutual insurers responded cautiously to the unknown consequences of Covid-19.  Exclusions were introduced, consistent with the Equality Act, to protect the existing membership.  As the worst effects of Covid-19 begin to fall away, mutuals are beginning to carefully explore how they can relax some of their exclusions and policy changes.

New research from AFM shows mutual providers continue to lead the way in paying claims

In 2019, Mutuals paid out on 19 of every 20 income protection claims. Read the full article here

Mutuals put their money where their mouth is with £26m IP claims spend in 2019

Read the full Health Insurance and Protection article here

AFM statement on protection insurance and coronavirus

Income Protection for illness is insurance against losing earnings due to disability or “incapacity” for longer than the set time in your policy, often called the waiting period or deferred period. It only pays out to people who can’t work and aren’t getting paid by anyone because of the severity of the symptoms from illness (or accidental injury), causing “incapacity”. How bad that incapacity has to be differs depending on the specific definition the insurer states in your policy.

This type of Income Protection doesn’t cover you for other reasons stopping you working, like redundancy or having to self-isolate to protect others, nor usually even yourself.

This means that, even if you buy an income protection policy with no coronavirus / COVID-19 exclusion applying, it’s still very unlikely you would receive a pay-out related to the coronavirus, unless you were one of the rarer group under 70 who develops much more severe symptoms.

However, the position is less clear for people with medical conditions not in themselves preventing work, but because of which they are now receiving medical advice to self-isolate for at least 12 weeks for their own protection. This will very much depend on the terms and conditions of the particular policy and especially how ‘incapacity’ is defined.

Although your insurance may well not cover you for these unusual circumstances, fortunately, the Government is taking steps to achieve some replacement of income lost due to the enforced halt in work for many people.

Where you are entitled to such income replacement under a government scheme, this will generally mean you don’t need to claim under your policy anyway as you will not have suffered sufficient loss of income for your policy to be claimed upon. But if you still have a large shortfall compared to the ceiling amount you’re insured for, you should contact your income protection provider to find out if you can claim.

This statement is valid as of 31 March 2020

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