Case study

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Rachel, 35, is a self-employed private detective. She leads a healthy active lifestyle but drinks tw...

Rachel, 35, is a self-employed private detective. She leads a healthy active lifestyle but drinks two bottles of wine a week. She has never smoked. Currently, she is looking to see what cover would be best for her and is open to suggestions. Rachel has £100 a month disposable income that can be set aside for a range of protection. What do you recommend for her?

Matt Morris, LifeSearch

The first port of call for this client should be income protection (IP). LV= offers a good policy on an own occupation definition for £51 a month, which is a good option considering she has a job that is not run of the mill. As she is self-employed, IP is even more important as she does not have an employer that will offer her sick pay or cover through the company.

This IP policy will pay her an income of £1000 a month up to the age of 60 if she cannot work, with a six-month deferred period. It sounds as if her job may be quite dependent on her having good health so IP is definitely an important aspect of her protection needs.

However if she has debts, such as a mortgage, and dependants she should also consider critical illness (CI) with life cover, especially as she has the budget to cover it.

£100,000 of cover over 25 years from Fortis will cost her £38.54. With the IP policy this comes to a total of £89.54 - well within her budget. These examples are for monthly guaranteed premiums and assume she is in good health.

Taking out life cover, CI and IP all together would give her an excellent level of protection and ensure that she is financially able to cope with the worst that life can throw at her.

If she drinks a lot of alcohol this could affect her cover, but two bottles of wine a week does not appear excessive.

Nick Telfer, PruProtect.

Rachel needs to consider the financial impact of serious illness. She could use some of the balance of her budget to arrange a PruProtect plan. A monthly premium of £46.16 would provide her with £50,000 cover for serious illness, £25,000 disability cover and waiver of premium on serious illness.

If Rachel has an outstanding interest-only mortgage, for £98.80 a month a PruProtect plan would provide her with £200,000 life and serious illness cover over a 20-year term to protect her outstanding mortgage in the event of her death or serious illness.

The serious illness cover is on a comprehensive basis, which means Rachel will benefit from cover for 154 conditions with claims assessed using objective definitions and payout linked to the severity of the condition. Also included is a waiver of premium on incapacity and on serious illness. The premium includes the minimum protected account option, which means Rachel's plan account will be reinstated immediately after a claim for serious illness cover. This will ensure that her protection is maintained at the very time she needs it most.

In addition to discounts on health-related activities such as joining a PruProtect partner gym and attending a health screening, Rachel could also enjoy significant discounts on the cost of Eurostar trips, a heart rate monitor, an annual cinema pass or a holiday.

Aidan Dewhurst, Royal Liver

Rachel is a healthy young woman with no medical underwriting concerns - she does not smoke or drink excessively and with Progress from Royal Liver she would certainly have plenty of protection options.

Assuming there are no surprises regarding her annual income, a menu-based plan would be proposed with IP and CI at its core. If this were written on a split trust basis, she would also have the flexibility that, in the event of a claim, different payments could be made to specific beneficiaries.

By taking out the plan on an escalating basis, Rachel can also link it directly to inflation. This way any claim payments would remain meaningful even in 20 years time. Finally, a 25-year term would be advised to cover her to retirement age.

The bonus for Rachel is that the plans Royal Liver has are deliberately flexible and include guaranteed insurability options. So if her circumstances change she can adapt her cover accordingly without the need for further underwriting. She might want to increase her protection to cover a new mortgage, or if she decides to get married or have children, she could add family income cover to her policy.

Progress from Royal Liver believes in offering its customers cover that matches their circumstances, which means flexibility - it does not take a private detective to work out that circumstances may change!

Given a £100 budget - a female with Rachel's profile could purchase a menu plan containing £100,000 for level term with CI, and £1000 a month IP - both on an escalating basis over a 25-year term.

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