A Guide to Life Assurance
If you have family member or business partners who depend on you financially, it would be beneficial for you to arrange life assurance. If you are not sure whether you need cover it is a good idea to seek the advice from a financial adviser. At Castlegate, we provide independent financial advice in Lincoln and the surrounding areas.
The main purpose of life assurance is to provide money for those who depend on you financially in the event that something should happen to you. Life assurance can provide the reassurance of financial protection for you, your family and your business associates.
A life assurance policy pays out a sum of money when the policyholder dies, this money is intended to clear any outstanding debts and provide financial support for dependents either through a further lump sum or via a regular income. Even if you do not have any persons who are financially dependent on you, there are some life assurance policies that can help meet the costs of your funeral and a potential inheritance tax liability.
The type of life assurance and the amount of cover will depend on an individual’s circumstances and requirements, factors to consider will include age, number of dependents, level of income and financial liabilities. As with other insurances, either monthly or annually premiums are paid to the insurance company for a fixed period of time or until the live assured dies.
There are many different types of life assurance policies and it is always good to seek professional financial advice from a reputable financial adviser to ensure that you find the policy that best suits your requirements, one who can research the wider market and is not restricted – an independent financial adviser. At Castlegate, our experienced team can provide support and advice on all aspects of financial advice in Lincoln and the surrounding areas. The different types of life assurance include various types of term assurance and whole of life.
Decreasing Term Assurance
With a decreasing term assurance policy, the level of benefit, paid tax free, decreases as the term of the policy runs, meaning that the value of the lump sum decreases over the life of the policy. The premiums are fixed throughout the life of the policy and do not decrease, typically premiums for a decreasing term policy are lower than other types of life assurance.
A decreasing term assurance is commonly used to protect loans, the benefit should reduce slower than the debt, ensuring that the debt is repaid in full. It is important the policy is arranged so the sum assured reduces at a rate which ensures it will always at least match the outstanding.
Increasing Term Assurance
The opposite of a decreasing term, an increasing term assurance policies level of benefit increases annually, typically in line with the Retail Price Index (RPI) or a predetermined fixed rate of increase. As well as the level of cover increasing, the premiums are likely to increase too. This type of life assurance is best suited to individuals wanting to provide family protection and is worth considering if you are insuring for a long term.
A type of term assurance which ensures a mortgage is repaid.
Whole of Life
As the name suggests a type of life assurance which pays out whenever the death occurs, rather than provide cover for a fixed period of time.
Writing policies under Trust
It is often appropriate to arrange life assurance under a trust to ensure certain as to who will benefit, speed of payment and not inflate an estate and thereby accentuate or create an inheritance tax liability. Professional advice is crucial to ensuring the right trust, arrange in the right way, is put in place.
Options are available to tailor a policy to an individual set of circumstances such a waiver of premium. This is where the premiums are no longer required to paid (although cover is maintained) in the event of the policyholder being unable to pay the premiums due to prolonged ill-health. Additional benefits can also be built into a policy e.g. critical illness benefit which pays out when a life assured suffers serious ill-health and can include children; terminal illness benefit pays out on the diagnosis of such an illness and can meet the costs of palliative care; income protection pays a tax free income on long term absence and conversion option can change a term assurance policy into a whole of life policy. A professional adviser can ensure your policy is tailored to your specific needs and requirements.
At Castlegate, we provide support and advice to our clients on all aspects of financial advice in Lincoln and the surrounding areas. If you are looking for independent financial advice in Lincoln or the surrounding areas, please do not hesitate to get in touch to discuss your requirements.