Ask Annie: What cover will I need if I go it alone and lose the safety net? - Spend & Save - Money - The Independent

Ask Annie: What cover will I need if I go it alone and lose the safety net?


Q: I have recently left my job as a company director on rather acrimonious grounds, losing the private medical insurance (PMI) that was part of my benefits package. I am considering going into business as a wine importer and wonder what types of insurance I should consider in case I'm injured or fall ill. What are the options for a budding small businessman? I am married and have a three- year-old daughter.

TR, Newcastle

A: Long-term income protection and life insurance are likely to be your most immediate needs, says Kevin Carr of broker Lifesearch. "Individual cover can be arranged to protect the family/mortgage, and separate insurance can be taken to help keep the business afloat."

To safeguard the family in the event of illness or injury, Mr Carr says income protection cover pays a tax-free monthly income until the policyholder returns to work, passes away or reaches retirement age. "It is important to make sure the cover is written on an 'own occupation' basis, which means you are covered if you are unable to do your own job, as opposed to any other job."

Life insurance pays a lump sum, or an income if preferred, in the event of death before a certain age. Mr Carr adds: "This type of cover has never been cheaper than right now and so it is a good time to buy."

As for PMI, you could look at a policy specially designed for the self-employed. For example, Axa's Independent Health Cover pays £1,000 to policyholders who are hospitalised, the idea being that the cash makes up for loss of income.

As your business grows, taking out further insurance is likely to become a must. For example, if you employ someone, you are legally obliged to have employers' liability insurance. You should also consider cover for: buildings and contents; equipment; business continuity; public and product liability; goods in transit; and legal expenses insurance for any contract or employment disputes.

Q: I have a Prudential with-profits bond that I would like to transfer to my 21-year-old son. What are the tax consequences of doing so? Similarly, what would they be if my son subsequently surrendered the bond?

DS, London

A: According to Danny Cox at independent financial adviser Hargreaves Lansdown, there are two potential issues to consider here: inheritance tax (IHT) and income tax.

You should have nothing to worry about with IHT if, on the date of the transfer, the value of the bond is below £3,000. Under IHT rules, you are allowed to give away up to £3,000 in a single tax year.

However, if the bond is worth more than this amount then your gift would be considered a "potentially exempt transfer" – meaning that you must live for seven years for it not to be included in your estate for IHT purposes.

As far as income tax is concerned, no money is payable by you or your son at the time of the transfer. But when your son comes to encash the bond, income tax may be due.

The amount for which your son is liable will depend on his tax status at that time. If he is in the higher-rate bracket, he will have to pay the difference between the lower and the higher rate of tax – 20 per cent from April 2008. However, the longer the bond is held, the greater the tax relief that can be claimed. Go to the HM Revenue & Customs website, www.hmrc.gov.uk, for precise details.

If you need help from our consumer champion, write to Annie Shaw at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS or email sindie@independent. co.uk. We cannot return documents, give personal replies or guarantee to answer letters. We accept no legal responsibility for advice given.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Life and Style
tech
News
Paper trail: the wedding photograph found in the rubble after 9/11 – it took Elizabeth Keefe 13 years to find the people in it
newsWho are the people in this photo? It took Elizabeth Stringer Keefe 13 years to find out
Arts and Entertainment
Evil eye: Douglas Adams in 'mad genius' pose
booksNew biography sheds light on comic genius of Douglas Adams
Arts and Entertainment
Robin Thicke's video for 'Blurred Lines' has been criticised for condoning rape
music
PROMOTED VIDEO
Sport
FootballFull debuts don't come much more stylish than those on show here
News
i100
Life and Style
Kim Kardashian drawn backlash over her sexy swimsuit selfie, called 'disgusting' and 'nasty'
fashionCritics say magazine only pays attention to fashion trends among rich, white women
Arts and Entertainment
TVShows like Agents of S.H.I.E.L.D are little more than marketing tools
Arts and Entertainment
Hit the roof: hot-tub cinema east London
architectureFrom pools to football pitches, rooftop living is looking up
Travel
travel
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

    £280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Senior BA - Insurance **URGENT**

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Training Coordinator / Resource Planner - City, London

    £35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...

    Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)

    £400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week