Protection Planning

There are many different forms of life insurance, some of which are mentioned below, and somany life assurance companies with similar offerings, that expert advice can be invaluable. Choosing the right one for you depends upon a number of factors including the level of protection required and what is affordable.

You can use the information below to gain a basic understanding of what is available, however this information is an overview, only expert, independent advice following a full review of your circumstances will ensure you find a solution that provides peace of mind at an affordable price.

Term Assurance
In its simplest form this type of cover is designed to pay out a certain amount if the insured person dies before a certain date. If the policyholder does not die within the term, the policy merely ceases, and there is no payout of any sort.

Term policies can either be level, decreasing (to cover a Repayment Mortgage for instance) or increasing in line with for instance, inflation.

A level policy simply means the sum assured remains 'level throughout the term of the policy'. If you die on the first day of the policy, you get exactly the same amount as you would if you died near the end of the policy. A decreasing term assurance policy on the other hand, will pay out more at the beginning of the policy than it would at the end.

Term assurance policies are relatively cheap and they perform the useful function of providing protection for those who may need it such as a spouse or dependant, if the policyholder dies. For additional cost, they may also include "Critical Illness" benefit.

Whole of Life Assurance
Similar to term assurances, whole-of-life are designed to provide life assurance coverage for an individual's whole life, rather than a specified term.

Generally whole of life policies are more expensive than term assurance because there is certainty that the policyholder will die at some time, but also because of what is covered and provided. They contain a savings component, which should build up a fund in the early years which will subsidise the life assurance cost in the later years. A fixed death benefit is paid to the beneficiary, this is either the sum assured or the value of the investment pot, whichever is the greater.

Premiums are often fixed for the first 5 years of the policy, and reviewed periodically thereafter, and the premiums or the sum assured may need to be amended depending upon investment returns. Management fees also eat up a portion of the premiums.

Whole of life policies can be useful for some people to provide for an inheritance tax liability

Mortgage Protection
Mortgage Protection is a kind of Term Assurance specifically designed to repay, on death during the term, the amount outstanding on a 'capital and interest' repayment mortgage. In other words, if the insured person dies prematurely, the outstanding loan amount on the mortgage will be repaid in full.

Some policies have extra benefits, which are additional sorts of cover, added on to the principal life cover. Such benefits include:

All these additions cost extra and are only paid subject to meeting tight criteria, so it is important to know what you are paying for and what is actually included in the policy taken out.

Business Protection
This covers your business from the adverse financial effects of the death of a key person, partner or shareholder. Business protection can be especially important to smaller companies whose reliance on key individuals to keep them running and make a profit may be greater than large corporates.

There are two main types of business assurance:

• Key Man
  This is used to inject a cash lump sum into a business in the event of the loss of a 'key person'. A key person may be a top salesman, or a key designer, or someone whose death would have a direct and adverse effect on the companies income. Usually it takes the form of a term assurance policy whose sum assured either covers a temporary replacement or loss of profit until a new person is found. The level of cover should be worked out with a financial adviser.
• Partnership / Director Share Purchase
  This deals with protecting the families and co-owners in the event of the death of one of the partners or directors. Each party agrees beforehand the value of his or her share of the business, and a combination of term assurance policies and legal documents are put in place to ensure that in the event of a partner's or shareholder's death, the remaining owners have a sum in place to buy out the family of the deceased for a fair amount. This helps keep the business running, and stops it being sold at the wrong time.

Health Insurance
It's only when you need to make a claim that you realise just how wise investing in health and medical insurance can be. There is considerable choice between different covers offered by different insurers. The key is to choose a balance between the cover you need versus the cost of premium.

By using an independent financial adviser with knowledge of the market, you can select the appropriate policy for you. You may be fortunate enough never to have to make a claim under your policy, but many people have been very grateful indeed that amongst all the other worries they had when they became ill or injured and unable to work, that they knew they did not have to worry about how they were going to meet domestic bills and keep a roof over their head.

• Critical illness
  Considering just how many lives are wrecked by critical illnesses such as heart disease, cancer and stroke, it is surprising that more people do not take out critical illness insurance. The principle is straightforward; in the event of an illness being diagnosed, the insurance company will pay out a lump sum after a survival period. Often, critical illness cover is combined with other types of insurance and may even provide an investment element so that, for example, a given sum will be paid out on the death of the insured.
• Permanent Health Insurance
  This is often called Income Protection and provides cover in the event that the insured is unable to work and therefore to earn, due to illness or injury. The premium cost will depend on a number of factors, such as occupation, health and term required..
• Private Medical Insurance
  Private medical insurance can be an appealing thought with NHS hospital queues and waiting lists. People often think of it as an expensive luxury, but what you pay for is what you get and there is a wide range of different insurances to choose from.
  Some policies cover youwhen you need specialist treatment or if the NHS cannot provide treatment within a certain period of time. Others offer you a fixed sum to pay for each treatment and allows you to shop around for the best or quickest available worldwide. At the luxury end of the market there are policies that cover a wide range of medical services such as dentistry, eye care and even spectacles, although the more a policy covers the higher the premium will be.

If you would like a 'no obligation' consultation to discuss any aspect of protection planning, please call us on 01225 771540 for an appointment.

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