In reality, the death rate is 1 in 1, 100%. Broadly speaking, its inevitable. However, ensuring that you have financial security in place regarding life insurance, can play a massive role in providing comfort in knowing that your loved ones are financially supported through their worst times.
It pays to speak to a specialist when deciding the levels of Life Insurance cover that you may need. Anastasia, our Life Insurance adviser at Fortune Financial in Hitchin, Hertfordshire, can provide initial advice free of charge. Anastasia’s contact details are at the bottom of this article.
What does Life Insurance cover?
Your Debt
Life insurance can be used to cover any remaining debt at the time of your death; this can be in relation to your mortgage, car loans and any credit card loans. If whoever you have appointed your estate to within your Will, without life insurance, any beneficiaries will incur your debt.
Your Income
If family depends on your income to cover debts, bills, and living expenses, it might be worth taking out life insurance. Life insurance can help your family adjust to new living arrangements whilst maintaining stability and peace of mind from financial issues.
Your Funeral
If you haven’t already thought about your funeral preferences, it’s worth thinking about in terms of the financial cost for your family. On average, funerals cost around £5,000 to £10,000; by purchasing whole of life cover, compared to the cost of standard funeral plans, this can become more cost- effective for you. For example, if you keep the plan for the whole term, you would still be in profit as your sum assured will be more than what you put into it in the full term.
Life Insurance policies
Life insurance pays out in the event of death, it provides a lump sum or regular payments giving financial aid to the dependents in your life. There are two main types of life insurance policies, the first being term insurance policies. Term insurance policies are in force for some years and eventually expires.
Level Term Insurance
Pays out a lump sum; whether you’re near the start or the end of your policy, the amount of sum assured always remains the same. The amount of sum assured you want to at the end of the policy is decided when the policy is taken out, which calculates the monthly premiums payable.
Decreasing Term Insurance
This method of term insurance protects a repayment mortgage upon death. As the mortgage decreases each payment per month, so does the sum assured within the policy. The term of the policy will run up until the mortgage is paid off.
Increasing Term Insurance
The level of this type of insurance rises over the policy term, each year by a fixed amount, to keep up with inflation regarding living costs.
Whole Of Life Insurance
Whole of life insurance ensures a lump sum payment in the event of death and the policy is in force right up until this. This insurance can cover financial burdens, such as mortgage debt and credit card debt, as well as funeral cover. Whole of life assurance is usually more expensive than Term Insurance, as WOL is guaranteed to pay-out from when the policy was taken out right up until death; there is no expiry like Term Insurance.
Life Insurance written in trust
What is a trust?
A trust is a legal arrangement in where it provides legal protection for you as the ‘trustor’ regarding your assets. A trust simply holds onto these assets for the beneficiaries and ensures that the distribution is divided correctly to the wishes made.
Did you know that you could be liable for 40% inheritance tax from your estate if your life insurance isn't written in trust? Ensuring that your life insurance is placed into a trust can override the need for probate and gives the certainty that your estate is distributed into the right hands, the right place at the right time.
Life insurance can make up a significant part of your estate. Suppose your estate, which comprises your property, capital and personal possessions, exceeds the threshold limit of £325,000. In that case, inheritance tax will be payable on the amount that exceeds the threshold. As an advisor, we recommend that you write your life insurance policy in trust to prevent this.
Thinking about Life Insurance?
Thinking about the different options of life insurance can sometimes become confusing or tricky.
If you’re entirely new to life insurance, we will be happy to discuss and arrange a tailored recommendation for you here at Fortune Financial.
We know that every person is in a different financial situation; we can guide and help you to pick a policy that best accommodates you.
Alternatively, if you already have a life insurance policy and haven’t had it reviewed in the past 12 months, we can help. Or if your circumstances have changed regarding personal information, including the recent purchases of a new home, a new medical diagnosis, or your family history has altered, then we can happily review this for you, and find you the best deal.
To help get this started, simply contact me at anastasia@fortunefinancial.co.uk.
Anastasia Burridge
Protection, Wills & Trust Adviser, Fortune Financial, Hitchin, Hertfordshire
