Insurance for you and your family
Case Study: Insurance for You and Your Family
Nigel and Tina had been married for some years, and both had good careers and bright prospects.They had young children, and thought it was about time that they reviewed their finances with an Independent Financial Adviser.
They met with ASPL and discussed their family, careers and their hopes for the future.We recommended that their main priority should be to financially "protect" their family against long-term illness and catastrophe (i.e.premature death), and so a number of complimentary plans were set up.
These plans ensured that the family could repay their mortgage and other debts, and had at least suffucient funding to pay for their children's further education and maintenance, whilst also providing a high level of income for the surviving spouse.This meant that should either spouse suffer a so-called "critical" illness and/or die prematurely,then the remaining family would be well looked after and financially secure.
A few years passed, and out of the blue, Nigel contracted a terminal illness, and his health unfortunately deteriorated.He subsequently died leaving his children fatherless, and Tina, a widow. Of course,nothing could replace him in the family's minds, but he died safe in the knowledge that his family would be well provided for and that his wife did not need to worry about money after he'd gone.
NB. Whilst the Client names have been changed for Client privacy purposes, these case studies are actual ASPL Client case studies.
Life Assurance
For a single person,without dependants, typically the only reason to insure one’s life is to meet the requirements of a mortgage lender.
Once we have a partner and/or a family, the need for life assurance becomes considerably greater. This is because not only do we wish to protect our family from becoming responsible for repaying the mortgage and any other debts, but perhaps more importantly, to make financial provision for dependants.
Where a spouse has, for example, given up work to raise a child/children, the death of the “breadwinning” partner can be financially disastrous as well as emotionally disastrous. Therefore the way to ensure continuation of the family’s lifestyle in the event of the breadwinner’s death is to provide a Cash sum which can be invested to provide ongoing income, e.g. until the children are grown up, or at the very least a breathing space whilst the surviving partner assesses his or her options, e.g. returning to work.
There are many types of life assurance, and please contact us for advice on any of the following:
- Level Term Assurance
- Increasing Term Assurance
- Decreasing Term Assurance/Mortgage Protection
- Convertible Term Assurance
- Family Income Benefit Policies
- Whole of Life Assurance
Serious or “Critical” Illness Cover
These insurance policies pay out a lump sum upon diagnosis of certain specified illnesses (e.g. cancer, heart attack, stroke or permanent total disablement). Such policies are suitable for single people (as they receive the benefit in the event of a successful claim), families and businesses. The proceeds can normally be received tax-free. Unlike “Income Protection” (or PHI), critical illness policies pay out a lump sum on diagnosis, whereas Income Protection/PHI pays a replacement income whilst you are unable to work due to ill-health. They are therefore quite complimentary.
As the likelihood of you suffering a critical illness is greater than you dying, this cover is understandably more expensive than straightforward life assurance.
Like life assurance, critical illness policies can be arranged over a certain short period (e.g. 5 years) or for many years.
“Income Protection” or “Permanent Health Insurance”
This type of insurance pays out regular sums of money to you upon becoming disabled through sickness or accident and therefore being unable to continue working. Such policies are therefore relevant to individuals with or without families. They are particularly useful to the self-employed.
If a policy is effected personally, no income tax arises on any payment under the policy.
The idea here is simply to protect your loss of income for many years. Arguably, the younger you are, the more benefit you could draw from such policies as there is a longer period of insurance (i.e. up until the day you retire, return to work after ill-health, or die).
Trusts
Why should you consider putting some or all of your life insurance policies under a Trust? The main benefits are to avoid Inheritance Tax upon the proceeds, to ensure that the death benefit gets paid to exactly who you want to receive it, and lastly that the life assurance monies are paid out exactly when it is needed.
A Trust is simply a way of giving some property (such as your life assurance proceeds) to other people without giving them full control over it. The main parties are the “Settlor”, (the person who sets up the Trust), the “Trustees” (the legal owners of the Trust property who are legally bound to look after the property in line with the Trust requirements) and lastly the “beneficiaries (the people who will receive any benefits from the Trust).
People
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Adrian is a Certified Financial Planner. He established Adrian Smith & Partners Ltd. in June 1999. His qualifications include Certified Financial Planner (CFP), Financial Planning Certificate (FPC), Advanced Financial Planning Certificate (AFPC), Securities Institute Foundation Certificate, Dip PFS.
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Ivan is a Certified Financial Planner and joined ASPL in 2003. His qualifications include: Certified Financial Planner (CFP), Advanced Financial Planning Certificate (AFPC), Financial Planning Certificate (FPC), G60 Pensions.
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