Life insurance covers you for a set term that you decide at the onset of a policy i.e. 10 to 25 years. The key thing to remember about life insurance is you are not guaranteed to get a payout, as you are not guaranteed to pass away within the term. The insurance is really there for peace of mind. If you outlive the policy you will not get a payout or a refund of any premiums you have paid.
Financial commitment cover
Most people take out life cover to ensure their financial commitments are met in the event of their death. Many mortgages and loans will have a life insurance element alongside so that they will be taken care of in the event of your death.
To minimise costs when protecting a financial commitment a decreasing term policy is often used. Effectively the sum assured reduces along side the outstanding debt meaning that the premiums are cheaper over the term of the policy, but ensuring there will always be enough to pay off the outstanding debt in the event of a claim.
Family protection is a must for those with dependants who rely on you financially. If you die, your family will receive a lump sum to pay off any outstanding debts, such as your mortgage or loans, and fund ongoing expenditure.
Generally, this type of insurance is taken out to provide cover while children are young, choosing a policy end date to coincide with when they consider the family to be financially independent. It is often a level term policy paying out a fixed amount to your dependants if you die within the fixed term. The premium stays the same (as does the payout) whether you die on the first or the last day of the policy.
Life assurance is not a fixed term product as it is intended to cover you until you pass away, whether that is weeks or decades after you have brought the policy.
Know as ‘whole of life’ or ‘permanent insurance’ it generally tends to be more expensive than standard insurance as it covers you for a longer term and you are guaranteed a payout at the end of the policy.
These type of plans can often be used as part of an overall solution to estate planning, for example to cover potential inheritance tax liabilities.
Relevant life insurance
Relevant life cover is a tax efficient way for small businesses to give single life death in service benefit tax efficiently, as it is possible to get tax relief on the premiums in certain circumstances.
For further information please contact Peter Jarvis at Myers Asset Management on 01782 557233 or email at firstname.lastname@example.org.
Myers Asset Management is an appointed representative of PHM Wealth Management Services LLP which is authorised and regulated by the Financial Conduct Authority. PHM Wealth Management Services in entered in the FCA Register under number 579336 which can be found at www.register.fca.org.uk.
PHM Wealth Management and Myers Asset Management are registered in England and Wales. Their respective registration numbers are OC372382 and 04345900. Both have the registered office address of Charlotte House, 536 Etruria Road, Basford, Newcastle-under-Lyme, Staffordshire ST5 0SX.
Please note that the information contained within this site is subject to the UK regulatory regime and is only aimed at clients based in the UK.