We all make plans for the future. We may look forward to a ripe old age, with children and grandchildren around us – but as the coronavirus crisis has shown us, things may not go to plan. We don’t know what is around the corner, and although we can hope to keep fit and healthy, the financial certainties we make our plans on can crumble.
But there are ways to help us protect both ourselves and those who depend on us for the long term, and at Continuum we believe it is never too early to start looking at them.
Securing your short term financial position
You need to take both a long term and a short term view. In the short term, you need a financial safety net, as a way to deal with financial problems.
Life insurance is an obvious must if you are a breadwinner. But as Covid has reminded us, illness can strike at any time. By considering Critical Illness Cover, Permanent Health Insurance and Accident, Sickness and Unemployment cover you may be able to deal with short term problems. You should have a financial safety net capable of protecting yourself and your loved ones – and ensuring that you have the financial stability you need to start thinking about at the long term.
Planning for the long term
Your loved ones will still need protection as the years go by – but this is where many people fail to arrange the protection they really need. Most who have life cover in place opt for term assurance, which lets you select how long you want the policy to last when you get a quote. You might for example choose 25 years, time to pay off the mortgage, and see the children standing on their own feet.
If you die in that time, it pays a tax-free cash lump sum to your loved ones, however, if you live beyond the term, your plan has no cash-in value. It can seem a bargain at the time – but with life expectancy growing longer, it can mean being without cover in our later years.
One possible answer could be Whole-of-life insurance which as the name suggests, is designed to last as long as we do ourselves.
What are the advantages of Whole-of-life insurance?
Whole of life cover costs more than term assurance but has two great advantages.
The first is obvious. The cover you need will be there when it is needed, providing a cash payout to your dependents who survive you.
Secondly, it can help cut your family’s inheritance tax (IHT) bill. There are some concessions for the family home, but IHT is charged at 40% on all your assets worth more than £325,000.
Your loved ones could be left with a major tax liability: A whole of life policy could provide the solution.
You can take out a whole of life policy and write it under trust, which means it is no longer taken as part of your estate. When it pays out your beneficiaries should receive a tax free cash lump sum, free of IHT liabilities, which they can use to pay off the IHT.
What will it cost?
How much you pay will depend on your age, health, and how much you drink or smoke.
As with all insurance, the higher the risk, the higher the premium. It will also depend on the sum insured,
You can take out a plan for one or two people, although it will only pay out once, on the first or second death depending on how the policy is set up.
Some plans also include sickness or disability benefits, and you may be able to take out waiver of premium with your policy. This will cover your monthly premiums if you fall ill and can’t make the payments.
With some plans, payments stop once you reach a set age, even though cover continues until you die.
Arranging your long term protection
Getting the cover you need for the future at the best price is vital, especially when money can be tight for many of us. But you can’t afford to delay, because the younger you are when you arrange your cover, the less it can cost.
The Continuum team can help you see the level of cover you need, and the best way to provide it at the lowest possible cost.
We can discuss your needs and ensure that you have the short and the long term protection you need.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable Protection products or investment strategy, you should seek independent financial advice before embarking on any course of action.
The Financial conduct authority does not regulate taxation and trust advice.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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