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About Life Insurance

While we are busy living our lives, it can be difficult to find time to think about what the consequences would be if we were to die. How would our partner cope without our income? Could they afford the mortgage? And what about the children? These are all questions we need to make time to answer, to reassure ourselves that we’ve made adequate provisions to take care of the ones we love.

Life insurance is one way to resolve these types of concerns, and to ensure those people who are most important to us are financially comfortable when we are gone. If you’re starting to explore your options in regards to life insurance, we can help you discover what you need to know.

What is life insurance?

Life insurance is a way to ensure your family are taken care of in the event of your death. It works by paying a set sum of money to the people you choose when you die. You might also hear life insurance called life cover or life assurance, but whatever the name, the function is the same.

Money paid through a life insurance policy can be used for any purpose by the people it is paid to. Most families use it to pay off a mortgage, to help cover the costs of your funeral or to meet the day to day living expenses of your surviving family. Choosing to take out life insurance now can give you the peace of mind that you’ve done everything you can to take care of your family both now and into the future, and because life insurance premiums get more expensive as you get older, you could save substantially by fixing your premium now.

How does it work?

In its simplest form, life insurance pays out a fixed sum to your family in the event of your death, as long as it is within the specified term of the policy. You choose how long this term is, and how much your family are to be paid when you die. Each of these decisions will have an effect on the premium you pay, which is usually paid in monthly instalments over the term of the policy.

Policies explained

Life insurance policies come in a wide variety of formats. They all pay out money to your family at the time of your death, but the amount and way this money is paid can be varied depending on the policy you choose. Some of the variables you will need to take into account include:

  • The term: Life insurance can run for the amount of time you request. Terms can be as short as 5 years, or can cover you indefinitely until you die (known as a ‘whole of life’ policy). In general, the longer you are covered, the more the policy will cost.
  • The amount: You can be insured for as little as £5,000 or for several million if you wish. Again, the higher the amount you wish to be covered for, the more your policy will cost you.
  • The payment: Most policies pay a lump sum to your beneficiaries in the event of your death. However, you can choose to instead provide a regular monthly or annual income to your family for years after your death, or to provide a combination of the two.
  • What’s covered: You can also choose various options in regards to what you wish to be covered. This means you can choose to have the policy pay out in the event of critical illness, or if you are diagnosed with a terminal condition.

There are other variables and options available to tailor your life insurance policy to your specific needs, so let us help you navigate the often confusing offerings from major insurance providers. Our consultants are experts in this field, and will be able to find you a policy that really suits your needs and budget.

Policy in trust

Less than 6% of UK life insurance policy holders currently put their policy ‘in trust’, and yet there can be significant financial benefits if you choose to do so. Putting something ‘in trust’ basically means giving it to someone responsible to look after until such time as the real beneficiary should have it. It’s a bit like giving your house to your children, but letting your spouse look after it until the children reach the required age.

The main benefit of putting your policy in trust is around the current UK tax laws. As it stands, a life insurance policy forms part of your estate when you die, and if your estate as a whole is worth more than £325,000, your family stand to pay 40% tax on everything over that amount. You can see that, with a house and a life insurance policy included in the mix, your estate could quickly start to add up.

By putting your policy in trust, the money is paid directly to the beneficiaries at the time of your death, meaning there is no tax to pay and the rest of your estate value is lower.



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