Your guide to life assurance policies

If you have dependants who would be affected should the worst occur, life assurance could protect your family or business. Find out the difference between term and whole life assurance, and determine the right level of cover for you and your family.

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Video transcription

*This video is for information only and must not be considered as financial advice. We always recommend that you seek financial advice before making any financial decisions*

This video is about life assurance, something everyone should have, if as a result of their death, there are financial consequences for others to deal with.

The most obvious example of this is for anyone who has family members, a spouse or children, who are going to be affected should the worst happen unexpectedly.

Life assurance is one of the simplest insurance arrangements around. You pay a premium to insure yourself for an amount that pays out in the event of death. This is most commonly arranged for a predefined term, for example, 20 years. This is known as term assurance.

However, some life cover can be arranged on a whole of life basis. Which means the cover runs for the whole of the rest of your life. This is known as whole life assurance. Life assurance may be needed to protect mortgages or other loans. To protect a business if you have a significant stake or role in the business. As well as to provide cash sums or income for your family members. To start with, the most important question that anyone needs to address is, what life assurance cover is needed. Many people have cover, but not enough. How do you work out the required amount? There is no set rule. But it is worth making sure that family members are properly catered for, probably for the rest of their lives.

For example, if your family requires £25,000 per year to look after everything, then the life assurance cover should be sufficient to make sure this amount is available to them. And should factor in future rises in the cost of living. Adjustments need to be made to cater for mortgages, loans and any pensions that may be paid later on. Plus, it could factor in children’s ages.

Each case is individual, and you should work with a specialist adviser to calculate how much cover you need. As they will be able to help you make the calculation. You will also need to decide whether you need a joint life policy, or separate policies.

Your health may be a factor, as premiums could be affected by your current state of health. Once you have decided how much cover is required. Then the term over which the policy is organised, should be determined. Do you need cover for 10 years, 20, or more? Or a whole of life policy. Again, this needs to be assessed on personal circumstances. And a number of factors taken into account.

Once you have the amount of cover calculated, and the term you require, then you need to find the most suitable policy and a competitive premium. Many life insurance companies offer policies and not all premiums are the same.

It makes sense therefore, to shop around as costs can vary, and there’s no point paying more than necessary. We can help you with this. There is then another step, a very important one, one which many people miss. Should your life insurance policy be subject to a trust, adding a trust into the equation is simple and makes perfect sense in most cases.

This helps, because in the event the policy pays out, the sum is not paid directly to your beneficiaries, but instead into a trust. The trust can be under the direct control of your beneficiaries or loved ones. And they can release the money as required to the beneficiaries. The advantages of this are that the money can be paid out immediately. There is no need to wait for probate.

The money can be protected against certain taxes. For example, future inheritance tax of the beneficiaries, and also against other eventualities. For example, a spouse remarrying later down the line and being subjected to a divorce. Although taking out life assurance is relatively simple, there are aspects of this which require careful appraisal and organising.

Finally, if you already have life assurance, it is worth having a review of your current policies to check. Is the level of cover correct? Is the term correct? Is the premium competitive? Is the overall way this is currently organised the most efficient way? We can help you with all of this. Whether you’re looking for life assurance cover, or looking to review your existing policies.

(You should carefuly calculate the amount of life cover you require. And consider what type of policy is best for your situation. You will need to decide if you need a joint policy or individual policies if you are a couple)

*Nothing in this video should be construed as advice. Viewers should not take any actions, or rely on any aspect of the video when making a financial decision. Any financial decisions or actions should only be taken after appropriate regulated financial advice has been sought and received*