A beginners guide to Protection
Most of us are more than happy to insure our homes, its contents, our pets and any travel we undertake, yet we often forget to protect the most valuable asset, ourselves.
It is important to think about what would happen if you suddenly found yourself unable to work; would you be able to keep up with your mortgage payments and bills? Or if you were to die would your dependents be able to continue living in the family home or maintain the same lifestyle? While Life Cover cannot deal with the emotional impact of a death, a critical illness or a disability it can remove one area of stress at what can be an incredibly difficult time.
There are various levels of protection available to protect you; giving you peace of mind that should the unexpected happen, your dependants and any outstanding financial commitments are taken care of.
Here we guide you through the different types of Life Cover that you may wish to consider:
Level Term Life Insurance:
This policy runs for a set period of time, which is known as the term of your policy. You will decide the amount of time you would like the policy to run for (such as 5, 10 or 20 years or to a specific age or life event) and the amount you want to be insured for. If you die within the term of your policy a lump sum will then be paid to your dependants.
Why Level Term Life Insurance?
- Provides your family with a lump sum to live on or invest
- You can choose a term that will last until your children are financially dependent or your mortgage is paid off
- Premiums are guaranteed to stay the same throughout the length of the policy
Relevant Life Cover:
This policy allows employers to offer their employees a death in service benefit. This will pay out a lump sum if the employee dies or is diagnosed with a terminal illness whilst employed during the term of the policy.
Why relevant life cover?
- Provides a tax efficient benefit to the employer who is paying for the policy
- Premiums are paid as a business expense; saving corporation and income tax
- Helps employers to retain high quality candidates
- The lump sum paid is not subject to inheritance tax as it is paid from a trust
Family Income Benefit:
Instead of paying out a lump sum Family Income benefit will pay a monthly/annual tax-free income to your dependents if you die within the term of the policy.
The money will be paid until the end of the agreed policy term. There is an option with this policy to have the payment increase over the term to reflect the increases in the cost of living or mimic would-be pay rises.
Why Family Income Benefit?
- This policy can be fairly inexpensive, especially if you take it out whilst you are quite young
- Ensure that your family receives an income should a parent/partner die
- Removes the worry from the dependants on how to cover the cost of regular bills
- If you are concerned that a lump sum could be spent too quickly Family Income Benefit is a good policy to consider
Critical Illness Cover:
Critical illness cover will pay out a lump sum if you are diagnosed with a critical illness such as a heart attack, a stroke or certain types and stages of cancer. This policy offers you peace of mind that you and your loved ones could cope financially if you were to become critically ill.
Why Critical Illness?
- Tax-Free lump sum is paid if you are diagnosed with a critical illness
- The money is yours to spend as you wish
- An individual is more likely to suffer from a stroke, cancer or heart attack by age 65 than to die – Zurich Life claims experience
Whole of Life Insurance:
Like Level Term insurance a whole of-life insurance policy will pay a lump sum when you die. However a whole-of-life policy isn’t confined to a set period of time and will pay out whenever you die. The size of your policy and period that you have to continue making payments for will depend on your policy.
Why Whole of Life Insurance?
- You are covered for life; your policy won’t expire or go down in value
- Premiums are usually reviewable every five years and may rise
- Tax free lump sum will be paid to your beneficiaries upon your death
Why use KDW?
We explain the different types of life cover that are available and advise you on which policies are relevant to you and your circumstances and we recommend an appropriate level of cover.
As independent financial planners we will search the whole of market to find the best policy to meet your needs.
We will undertake regular reviews of your policies making sure that any changes in your circumstances are reflected in your level of protection.
For more information on life cover please contact us:
Tel: 01727 85 22 99
Email: lifeassurance@kdw.co.uk