With spring definitely in the air and with the new tax year now upon us, it could be time to take a fresh look at your financial arrangements. A financial spring clean could be the first step to making your money work harder – and having more of it in your pocket.
At Continuum, we are looking at insurance arrangements and whether a financial spring clean could mean better protection for those you love – for less.
Look at your insurance policies
We all know the importance of life insurance. It would provide for our loved ones if we were no longer there to provide for them ourselves. Most of us already have a policy in place, as it tends to be a condition of most mortgage offers.
If we are a breadwinner for a family, it is vital for peace of mind. With the right policy, you could guarantee an income for your family and pay off the mortgage to ensure they could keep their home.
But do you have the right insurance?
It makes very good sense to check as part of your financial spring clean.
Question one – do you have the right kind of cover?
There are two types of life cover, life insurance and life assurance. But although both tend to be lumped together, they are not quite the same.
Life insurance runs for a set term. This can be arranged to coincide with your retirement, or with the date you plan to pay off the mortgage.
If you die, your life insurance provider pays your dependents an agreed lump sum. The amount depends on the level of cover you buy and you can tailor the cover you need to your circumstances. You can, for example, choose a level of cover that goes down or up as years go by. You can make your cover part of a financial safety net with other types of protections, such as accident cover, critical illness cover and income protection.
Life assurance or ‘whole-of-life cover’ lasts for the rest of your life. The monthly premiums are relatively high because insurers know that they’ll have to pay out eventually.
The lump sum from a life assurance policy can be written in trust, which means that it will be received tax free. This can mean that it can be ideal to help dependents pay off inheritance tax.
Question two – do you have cover for you both?
Many couples only have cover for the main breadwinner. It is tempting to imagine that a full time parent does not need cover. But it is important to remember a non-waged parent makes a valuable contribution to the financial security of your family.
Fortunately, you can arrange joint cover for yourself and your partner, which can help keep costs down while providing the protection you need. It costs less than two independent policies, because it is only designed to pay out on the death of the first partner.
Question three – do you have enough cover?
The value of money is constantly being whittled away by inflation, and a policy that seemed generous 20 years ago might look much less worthwhile now.
Even if you have cover in place, it could be time to review it and if you don’t, it is almost certainly time to start.
Question four – what will it all cost?
The cost of life cover will vary based on a number of factors including your age, health and occupation. The younger you are when you take out cover, the less it can cost to get the protection you need. But as with many things, it pays to shop around and it may be possible to get the level of cover you need for less, with some expert help.
Many providers are offering new terms and products. Some of them may be a better solution for your needs.
The chances are that we can help you find cover that is a better answer for your needs – and cost you less – as part of your financial spring clean.
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, you should seek independent financial advice before embarking on any course of action.
The Financial Conduct Authority does not regulate taxation advice.
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