Protecting Your Family

(if you are single and not co-habiting see protecting your lifestyle)

Why do I Need Family Protection?

Have you considered how you would cope if your husband, wife or partner suddenly died. More importantly how would your family survive if you were not there to cover the household expenses the mortgage, the luxuries and the credit card bills each month.

If you have children giving them the support (they need to grieve and adapt in the early months) could mean working less hours. If part of your income is commission, or bonus, based then this could lead to serious financial issues.

In these circumstances will you be able to afford private schooling, new uniforms, sports equipment, holidays and the ever increasingly more expensive Christmas. It is not a pleasant thought that your loved ones may be on the breadline just because you omitted to provide life insurance.

Protecting your family debts and providing replacement income is now more affordable than before. Life rates have reduced over the last few years, and it now makes sense to arrange the additional life assurance you need and/or review what you are already paying. We may be able to increase the amount of cover for the same premium or your existing cover could cost you less.

Family Protection is available in 3 basic forms for three different purposes

• Life Assurance - Provides a lump sum in the event of death
• Critical Illness cover - Provides a lump sum on diagnosis of a Critical Illness
• Income Replacement -Provides an income in the event of illness or disability.

How Much Protection do I need?

A rule of thumb guideline is as follows:

Life Insurance: a sum equivalent to 10 times your family's yearly income plus a sum equal to the total of your mortgage and other debts.

Critical Illness: a sum equivalent to your family's yearly income plus a sum equal to the total of your mortgage and other debts.

Income Replacement: a sum based on a percentage of your income, this will generate a regular monthly income rather than a lump sum

The total sum may of course combine a mixture of individual or joint cover depending on who generates the income. We will be able to provide you with guidelines to help you frame your personal solution.

Life Assurance

Life assurance is more of a friend than you may think. It all depends on your individual/family needs. There are so many varieties of insurance available to be linked to your life, expert advice is invaluable.

The ideal method of protecting your family against death is a life assurance policy. On Death the policy pays out a specific lump sum ensuring that the surviving dependants receive sufficient to produce an income to enable them to maintain the standard of living they are accustomed to and/or pay off the mortgage or other debts.

Term assurance

A straightforward Term policy on either a level or reducing basis, depending on the repayment arrangement of your mortgage, is usually the best and cheapest way of providing this most basic need. At its simplest, in exchange for paying a premium, the life office will agree to pay out a certain sum if the insured dies before a certain date.

This kind of policy is generally inexpensive and very effective in providing protection for the beneficiaries of the policy, such as the surviving family, if the policyholder dies. If the policyholder does not die within the term, the policy ends with no payout or value.

Endowments

Many policies provide not only protection but also investment. The principle here is that the premiums that are paid in respect of the policy are invested in order to benefit the policyholder or other beneficiary at a certain point in the future.

Endowments are a common form of investment policy. A regular premium is paid, and then at the end of the term when the policy matures a lump sum is paid out and may be used to repay a mortgage. Endowments will also have a sum assured (Life Assurance) that will pay out a predetermined amount, usually an amount equal to an associated mortgage. This will pay out in the event of premature death of the policyholder.

However, due to poor investment performance in the past, many providers no longer market these products.

Whole-of-life policies

Similar in nature to term assurances, whole-of-life policies provide cover for the whole of the insured's life. Generally more expensive than term assurance because there is certainty that the policyholder will die at some time. The benefit payable on death will be either a lump sum or the value of the invested fund, whichever is higher.

In summary

Life related insurances are all about what sort of benefits you want from them. If it is basic protection for loved ones when you die, then the costs can be quite modest and the policies quite straightforward. For investment products inclusive of life cover, the terms may be more complicated, but long-term returns can be worthwhile. Life assurance is not necessarily easy to understand but it is an important ingredient in many people's financial portfolio.

Critical Illness

A Critical illness policy pays out on diagnosis and survival of a specified serious illness, for example stroke, cancer or heart attack. This is intended to provide financial help at the point when it is most needed and enable recovery and recuperation. Critical illness protection can be considered to be the most important form of protection. Often a small amount of this cover is sufficient.

We are fortunate that medical advances now enable us to survive illnesses that would have killed us in the past. However, recovery may still involve a period of or permanent incapacity which may prevent us resuming our previous working routines.

Our advice is always to take as much critical illness cover as you can afford now.

Income replacement

In the event that you lose your ability to work (and therefore ability to earn sufficient income) you would still require an income to meet your normal living expenses and maintain your independence. Benefits would normally commence after an initial 'waiting' period of between1-12 months (decided at outset by you) and would continue until your retirement age, or until you return to work (whichever occurs first). Income replacement is an essential for those whose employers do not provide it, or anyone who is self employed.

Do you already have cover?

If you already have lifecover in place, we may be able to provide you with better value cover, this is because the cost of life cover has dropped in recent years.

Dont delay ring 'Mortgagehunters' today for a protection review

 See whether we can improve your value for money.

 

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.