Term Assurance	Whole of Life Assurance	Mortgage Protection	Business Protection	Health Insurance

Protection planning is about providing a level of financial security for people who depend on you financially such as your family or business colleagues. Most of us want to ensure that our families and ourselves are financially secure if we become seriously ill or die.

Expert advice is invaluable, not only in choosing from the many different forms of protection available (some of which are mentioned below), but also from the great many life assurance companies with similar policies. Choosing the right cover depends upon your individual circumstances as well as the type of protection required, and more importantly what is affordable.

Life assurance will pay out a lump sum or fixed regular income either when you die (if a whole of life policy) or if you die within a specified term (term assurance).

The information below is designed to give you a basic understanding of what kind of cover is available, however this information is a summary overview. There are many other protection policies designed to protect an individual and his or her family against other events such as serious or critical illness, permanent disablement, serious accident, the loss of income due to being unable to do your job and redundancy.

Only expert independent advice following a full review of your circumstances will ensure you find a solution that provides peace of mind at a price you can afford.

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Term Assurance

Term assurance is the simplest and least expensive form of cover. It performs the useful function of providing protection for those who may need it such as a spouse or dependant, if the policyholder dies.

Term assurance only pays out if the policyholder dies within the term agreed. If they live longer than the term, there is no payout of any sort. Couples can also take out term cover in both their names, with the policy paying out during the term on the first death only. Some policies include "Critical Illness" benefit for an additional cost.

There are different types of term policy:

• family income benefit (a policy which pays out income rather than a lump sum);
• increasing policy (where cover and premiums rise over the years );
• decreasing policy (where cover decreases over the years);
• level policy (where cover is level throughout the term); or
• renewable policy (which lets you extend the original term).

Decreasing term assurance will pay out more at the beginning of the policy than it would at the end, and is often linked to a repayment mortgage (where the amount owed decreases over time as it is repaid). It may also be called mortgage term insurance or mortgage protection life assurance.

Increasing term assurance usually increases in line with inflation (RPI) or at a set percentage every year, which helps stop the real value of the cover being eroded away.

Premiums are usually fixed for the whole term, or may increase in line with an increasing sum assured. There are also contracts where premiums are reviewable (as opposed to guaranteed) after a certain period, usually five years. The premiums may then increase or the level of cover decrease.

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Whole of Life Assurance

Whole of life cover is similar to term assurances, but is designed to provide life assurance coverage for an individual's whole life, rather than a specified term. It pays out an agreed sum upon death of the policyholder, whenever that is, as long as the premiums are still being paid.

Generally whole of life policies are more expensive than simple term assurance because there is certainty that the policyholder will die at some time, but also because of what is covered and provided. The cost of any life cover depends mainly on the likelihood of the insurer having to pay out – so a smoker doing a dangerous job, will pay more than a non-smoking office worker. Life assurance also costs more for men because, on average, they don't live as long as women.

Some whole of life policies 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 may be 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 (IHT) liability .

Guide to IHT

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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:

• Waiver of premium benefit - the premiums are paid for you if you are unable to work due to sickness or accident
• Income protection benefit - a percentage of your income is paid to you if you cannot work at your usual employment due to sickness or accident
• Unemployment benefit - a variety of income protection benefit
• Critical illness cover - the benefit is paid before death on the diagnosis of life shortening disease (e.g. cancer). This benefit may replace the death benefit, or it may be paid as well.

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.

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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 businesses, whose rely on key individuals to keep them running and to make a profit.

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 required 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 can stop it being sold at the wrong time or to a competitor.

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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 you when 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.

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