Not everyone needs life cover; but if you have a mortgage, other debts, a dependent spouse or children then the answer is yes – life cover will protect your loved ones from the financial impact of your death, securing their financial future.
What is life cover?
Life cover will pay either a lump sum, or regular payments, if you die during your chosen term of cover. The amount of money paid out depends on the level of cover you arrange at outset. Things to consider when setting a policy up are:
The sum assured; How much? Any mortgage or debts should be covered, as well as an amount for your dependents who rely on your income to meet living expenses.
The term; How long should the plan run for? For a mortgage, until the mortgage is repaid. To protect a family; the term should match the expected time family members will be financially dependent.
The Insured; Who should you cover? ‘Single life’ policies cover one person. A ‘joint life’ policy covers two people - you choose whether the policy pays out on first or second death.
The different types of life cover
There are two main types of life cover; ‘term assurance’ and ‘whole-of-life’;
Term assurance is the simplest and cheapest form of life cover. The policy pays out if you die within the policy term. There are various options to consider:
Level Term Assurance - The policy will pay out a lump sum and can be used to protect a mortgage or other debt, or as family protection.
Decreasing Term Assurance - The amount of cover reduces over your selected term, typically this is used to cover repayment mortgages; as the outstanding mortgage balance as it is gradually repaid the sum assured reduces along with it. The premiums are cheaper than level cover as the cover reduces over time.
Family Income Benefit - A monthly sum is paid from death until the end of the term selected. These policies are an economic solution for a family who wish to protect themselves from losing a breadwinner. Again, the premiums are cheaper than level cover as the cover reduces over time.
Whole-of-life cover is designed to provide you with cover throughout your whole lifetime, not just within a specified term, as long as the premiums are paid in accordance with the policy contract. As the policy will pay out, no matter what age you die, the premiums are more expensive than those with term assurance policies.
If you’d like to read more on the basics of life cover visit the Money Advice Service (a government-run body) here.
What isn’t covered?
Life cover only pays out if you die, not if you are unable to work due to illness or injury.
There are other forms of protection insurance available; such as critical illness cover which pays a lump sum if you are diagnosed with a specified serious illness. This can help you repay a mortgage or meet medical costs. Another form of cover is income protection which will pay you a monthly income if you are unable to work until you can return, or you retire, whichever is sooner.
How do I get professional advice on my protection needs?
As part of your financial planning, protecting your family and your income is just as important as investing money for the future.
For independent advice on arranging cover for your family please contact us at info@martin-redmanpartners.co.uk or call us on 01223 792 196.
Martin-Redman Partners are a team of experienced Financial Advisers who can advise on your personal or business financial arrangements. We have been building trusted relationships with clients for many years by articulating clear and tailored recommendations in areas ranging from investments to retirement planning, to complex estate planning advice.
The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of UK legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly, no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.