Life is always unpredictable – which is why ensuring you have both long term and short term protection for your family is vital.
We may want to look forward to a ripe old age with our spouse or partner, with a home we love and no financial worries – and probably with children and grandchildren around us. But life can be unpredictable, and things may not go to plan.
The sad fact is that we don’t know what is around the corner. But there are ways to help us protect both ourselves and those who depend on us financially, and at Continuum we believe it is never too early to start looking at them.
In the short term
We all have financial plans and commitments – which means we all need a financial safety net to help if things go wrong.
Life insurance is an obvious first step, and most of us have it. But accident or illness can strike at any time, and in the worst cases can leave us permanently unable to work – and obviously unable to call on our life insurance cover.
But there is a solution. By adding Critical Illness Cover, Permanent Health Insurance and Accident, Sickness and Unemployment cover to your life policy – or providing them as standalone policies, you could have a complete financial safety net. If you or your partner became incapacitated, or even temporarily unable to work or even were made redundant, it could replace your income – ensuring that money worries would not be added to your problems.
And in the long term
Your financial needs, and your need for insurance protection will change of over time, but they may never go away.
Your loved ones will still need financial security as the years go by, and their needs may actually increase as the years go by.
Many of us opt for term assurance when we arrange life cover. This lets you select how long you want the policy to last when you arrange it. A common choice is cover for 25 years, time to pay off the mortgage, and see the children standing on their own feet.
This type of cover will of course pay a tax-free cash lump sum to your loved ones if you die within the 25 years. It can mean a smaller premium, but it will eventually run out, leaving you with no cover at a time when the need to protect vulnerable dependents can actually be greater than ever.
With life expectancy growing longer, many more people are discovering that they are without the cover they really need in their later years.
One consideration could be whole-of-life insurance cover. It costs more than term assurance but has three great advantages.
The first is of course that it will cover you for the rest of your life. You have the peace of mind of knowing that your loved ones will be provided for, whenever you die.
The second is that the costs can be fixed. The earlier you take out your cover, and the younger and healthier you are, the less the cover can cost in the future, making budgeting simpler. However you should regularly review the level of your cover to ensure it remains adequate
And thirdly? Whole of life cover can be key to estate planning. Whole of life cover can form part of a strategy to mitigate the impact of IHT. Continuum often consider this type of cover when we are discussing estate planning, so potentially more of your wealth goes to your loved ones, and not the taxman.
Inheritance tax – IHT – is charged at 40% (for the tax year 2020/21) on all your assets worth more than £325,000 referred to as the nil rate band. (It is possible for some people to qualify for the residence nil rate band, currently £175,000 tax year 2020/21. Visit HM Revenue & Customs.GOV.UK for details)
Your loved ones could be left with a major tax liability, but by taking out a whole of life policy and writing it under trust, it is no longer part of your estate. When it pays out your beneficiaries should receive a cash lump sum, free of IHT liabilities, which they can use to offset the IHT liability
What will your protection cost?
With all types of life and related covers, how much you pay will depend on your age, health, factors such as how much you drink or smoke and the size of the sum you want to secure for your loved ones.
It will also depend on the provider, and this is where contacting Continuum is so important. We are independent, so not only can we provide unbiased advice to you as our client, we can search the entire life insurance market for the cover you need at the lowest possible cost.
Arranging your protection
We can explain the options, help you decide on the level of cover you need, and the then work to provide it at the lowest possible cost.
Long and short term financial protection for your loved ones is vital. The simplest way to ensure that you have it is to contact us today.
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 also our understanding of current HMRC tax rates, you should seek independent financial advice before embarking on any course of action.
Your home may be repossessed if you do not keep up repayments on your mortgage.
The Financial Conduct Authority does not regulate taxation and trust advice & will writing.
The levels, bases and reliefs from taxation are subject to individual circumstances and may be subject to change.
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