|
|
| Home > Life Assurance |
 |
 |
This form of insurance is to pay a lump sum of money on death. There are three main reasons why a policy may be needed for an individual. There are also business reasons for a policy.
Family Protection
While we are alive, we can look after and provide for our family. Life cover can be used to provide for your family if you are no longer here to look after them. While it can never replace a partner or a parent, it can help to ease the financial pressure. The amount of cover that you require is usually based upon your income and how long you need the cover for. While most people do not like thinking about death, life assurance together with a good will is an essential part of financial planning. None of us know how long we will live for but through proper planning, it ensures that the family's future plans are not left to chance.
Loan Protection
When taking a loan, life cover can be used to repay the loan on death. This is particularly popular with mortgages, as it means that the mortgage will be repaid on death and it will allow the house to pass to the family, without any debt.
Inheritance Tax Protection
Many people start to worry about inheritance tax, as their assets accumulate. There are a variety of ways to reduce inheritance tax but they do involve re-arranging your finances. While it is not suitable for everyone, one solution is to set up a life policy that will pay off tax bill on death. It is important to place the policy into trust, to avoid paying any inheritance tax on the life cover proceeds.
Trusts
There are various types of trust but they all have various features in common. Their goals are usually to maintain control over money or an asset and to avoid inheritance tax. Setting up a trust can be quite simple but it is important that professional advice is sought, to ensure that it is appropriate to you and to ensure that you understand the tax implications. A trust is a legal document that places various people (trustees) in charge of an asset or assets to be looked after on behalf of nominated people (beneficiaries) or potential people (potential beneficiaries).
Life Cover for Businesses
Life assurance can be used to protect business loans. If there is an individual in the company, that is vital for the profitability of the company, then life cover can be used to insure the company against their death. With a partnership, life cover can be used to provide the remaining partners, after one of their deaths, with the money to purchase the deceased partner's share of the business. This has the advantage of the remaining partners having the certainty of what will happen with the business and the deceased partner's family benefiting from the cash payment.
Critical Illness Cover
This can be taken as an addition to a life cover policy or as a distinct policy in its own right. It provides a lump sum payment on the diagnosis of specified illnesses. Not all companies cover the same illnesses and their definition of illnesses vary. It is important to check the policy wording. This can be used for all of the reasons above but is not used for inheritance tax planning. There is a high claim rate with this type of policy, which has resulted in it being more expensive than life cover. |
|
|
|
|
|
|
