Q&A

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 11-15 D'Olier Street, Dublin 2, or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.

Health insurance

We moved house about four years ago. As I did not inform the VHI of our change of address, our cover eventually lapsed. We reactivated our membership about a year ago. As my wife and I were both 59 at the time, we were told we would have to wait seven years before we could make a claim for any new health condition that might have developed during the two or three years of our lapsed membership.

During the dormant period, we both developed blood pressure and while we are, at present, in good health and very active, we are worried about what would happen if one or other of us developed heart or other problems related to blood pressure, which could involve us in exceptionally high medical costs.

Have you any suggestions on how we might provide for a cost of this type? I'm sure many people have had similar problems. The VHI now cancels membership if payment is 13 weeks overdue, regardless of how long one has been a member.

Mr M.McK., Dublin

I am sure you are quite right when you say that many people have encountered the same situation and not only with health insurance. You would be amazed at the number of insurance policies which fall void because people fail to keep up the payments on them. The only winner in such cases is the insurer, which has drawn in the premiums and got out before incurring costs.

However, that is simply the nature of the contract and it would be unfair to blame the VHI or any insurer for lapsing a contract where payment due has not been met.

Cases such as this show why direct debit can be of service not just to billing companies but to their customers, providing always that funds exist to cover the mandate. Much use it is to you now, but your situation also shows the importance of keeping an organised record of people who need to be contacted in the case of a house move.

Alternatively, An Post will simply redirect your post for a period of time. I believe this is free initially, although you might have to pay a nominal sum for a longer period.

Turning to what you can do now. Firstly, you can thank your stars if, as your letter implies, VHI will cover conditions which were in existence prior to your being lapsed. In certain states that might well not be the case.

While it is always possible that you could develop blood pressure-related conditions within the exclusionary period, you can buy cover under a critical illness policy, for example.

Given your ages and the fact that you have been diagnosed with blood pressure problems, the premiums might be quite high but they would give you peace of mind in the event of any emerging related condition and that, after all, is what insurance is about. When looking at critical illness, shop around. Rates can vary as can the cover. Pay careful attention to what is included/excluded under the wording of any given policy.

Another option, which would provide some element of security for those years you are working, is the ability to claim medical expenses back against your income. This is done on a Med 1 form and is usually paid on a following year basis. However, in cases of hardship, it can be offset against income tax in the same year. The first £100 per person or £200 per family is excluded but, for the sort of conditions that concern you, this is not likely to be an issue. It is true you would still face the costs involved with any condition but you could, at least, look forward to getting some of it back.

Bacon report

Will any of the measures in the latest Bacon report impact negatively on returning emigrants who are simply purchasing housing for their own use and not for rental or speculative purposes?

In my own case, as a non-resident, I bought a vacation home in Ireland many years ago and without benefit of any tax relief scheme. The house has never been my primary residence as I have continued to work and live overseas. As it is my intention to retire to Ireland, I hope to retain use of my holiday home but I also intend to sell my overseas home in order to buy a principal private residence in Ireland. As I will not be investing for speculative purposes, how will the new Finance Bill treat my situation?

B, e-mail

Unfair as it might seem, the Bacon III measures as outlined in the new Finance Act, which came into force on July 5th last, will impact on you. The thing to remember is that what matters under Bacon is the number and type of property you own, not your intentions for it.

When it refers to speculation, it refers to the increase in value one can reasonably expect on the capital invested in property. Under the proposals, you would already be seen as having two homes and therefore would fall under the terms of Bacon III. Obviously from your letter, both the principal residence - wherever that is abroad - and the holiday property in Ireland were bought before the June 15th deadline mentioned in the Bill, so you would not face any penalty.

However, if you were now to sell the main residence and buy another in Ireland or, for that matter, elsewhere, you would face the 2 per cent anti-speculative tax. In Ireland, you might also have to consider the 9 per cent stamp duty.

As far as residence is concerned, it is the physical location of property in the State rather than your residence which determines liability to the tax. Given that the holiday home would remain as such, it would be the property on which the tax would fall due once you purchase a new principal private residence. The tax is due on the non-principal residence. This would mean paying a 2 per cent charge on the current value of the holiday home for the first three years after the other house was purchased. It does not matter that the holiday home was bought before the latest measures were introduced.

As a returning emigrant in the situation outlined above, you would probably pay stamp duty under the less onerous "other owner occupier" category, avoiding the 9 per cent stamp duty on second properties.