This will provide a substantial tax-free lump sum that can be used to pay off a mortgage, or be invested to provide additional income. Kim Addavide, of Hexham-based AYP Financial Limited, is a supporter of permanent health insurance (PHI), which will pay you a salary when you can no longer work. "If you can afford critical illness and PHI, then that's fine, as you will get a lump sum to pay off a mortgage. But the biggest worry for most people is what would happen if they lost their income. "If you look at how old you are now and how many years you have to go until you are 60, what you are protecting is your annual salary. If you can't go back to work then you need income protection. "I have a lot of clients who are single women, either because they haven't married or are divorced, and something we do a lot of is PHI, because they realise that, if anything does happen to them, no-one is going to be able to support them financially. "PHI takes away the money worries. I had a woman a couple of years ago who was the main breadwinner. She qualified for six months full pay and six months half-pay and she couldn't afford both critical illness and PHI. "So she opted for PHI and it made all the difference as she later contracted breast cancer. She was off work for at least two years." Kim believes the premiums are a small price to pay for peace of mind. "As an example, I have a 52-year-old teacher who doesn't smoke who is paying around £60 a month for PHI. That will give her £800 a month tax-free after 12 months for five years. "I have another client who is 46 and paying £36 a month. She will be entitled to £1,100 a month after 12 months. Her rationale is she gets six months full pay and then six months half. "But without the PHI after 12 months she would get nothing and would have to resort to using her savings. If she found she couldn't return to work, then she would have money coming in until she is 60 when she will get her occupational pension. "On that basis, PHI is good value, and, I believe, a must for everyone." Finances allowing, Kim advocates critical illness cover. But she says people must make sure they get the right policy. "Just as there isn't one type of breast cancer, so there isnÃt one type of critical illness cover. "You have to look carefully at what is and isn't covered. There was a case recently of a lady who had an inkling that something might be wrong and got a policy. "Some months later, she was diagnosed with breast cancer and the insurance firm refused to pay out. She took the matter to the Financial Services Authority and they said the insurer had to pay because it was their representative's fault for not being more careful. "And the number of times I have heard, 'my employer is really good. There won't be a problem'. "It doesn't matter if you get on. In periods of economic uncertainty, good relationships count for nothing." Adele also suggests having at least 20% of a savings portfolio set aside in cash. "You really need to make sure you have sufficient cash on deposit." Financial checklist >>> | 
