Financial protection for you and your family

Introduction

When it comes down to it what matters most to people is their family. When it comes to the crunch, its family we first think of, family we worry about and family that gives us most happiness. The desire to protect those closest to us is a fundamental need.

We can never know, what life will throw at us in terms of ill-health, disability or death, but what we can do is make sure our family is financially secure should the worst happen.

This is where life assurance and other protection policies such as Income Protection and Critical Illness Cover come in. Because life assurance has been around so long, and because everyone should have some level of financial protection, more than 100 companies provide life assurance and protection policies. This makes for a competitive market which can only benefit consumers.

However, over the years the policies have become increasingly complex with many options and features that differ from plan to plan.

Other forms of financial protection

Simply having life assurance may not be enough. What, for instance, if you contract a near fatal disease or illness? Cancer, stroke and heart disease are the greatest risks. You may not be able to work and so lose your income; but you are still alive so your life assurance does not pay out. And to compound the problem, you may need expensive nursing care or to adapt your home, or even move house.

What type of cover

If it is just basic cover you are looking for and you are familiar with the various types of policies on offer, we can offer you the facility to get an instant quote and buy on-line. As the industry now is very competitive if you took your policy some time ago we may well be able to save you money on your premiums.

Life insurance premiums

Life insurance policyholders pay premiums into a fund from which all claims are paid out. There are two types of premium available – the guaranteed and reviewable policies:

Guaranteed Premiums – The life insurance company guarantees to never increase your policy premium. Reviewable Premiums – You agree that the company can review your policy at set intervals.

Initially the reviewable premiums will work out cheaper. However, over time these premiums are likely to be increased and therefore the overall cost will surpass that of the guaranteed premium. So generally, guaranteed premiums will work out as a better buy in the long run, but if you are on a tight budget the reviewable premium presents a better short-term option.

Term Assurance

This is the most basic form of life cover you simply cover yourself or your parter for a set amount of cover for a set amount of time. If you die within the term of the contract then the sum assured will be paid to whoever you name as benificiary on the policy.

Decreasing Term Assurance

This cover is suitable to be taken alongside a repayment mortgage, the intial level of cover will decrease each year in line with the reduction in your mortgage.

Family Income Benefit

Instead of a single lump sum benefit in the event of death, family income benefit will pay a set level of income for a set period of time, the benefit will be paid tax free to your beneficiares.

Whole of Life Assurance

This guarantees the payout of a lump sum when the policyholder dies, at whatever time that may be as long as payments are maintained. The premiums and sum insured are guaranteed not to increase for the first ten years. However, they are more expensive as a claim is assured. These come in various forms:

Non-profit whole life policies – A level premium payable throughout life. It pays a fixed cash sum at the time of death.

With profit whole life policies – Same as non-profit policies but the amount paid on death is the sum assured plus whatever profits have been allocated.

Low cost whole life policies – These have a guaranteed level of cover that the amount payable on death is greater than the basic sum plus bonuses or the guaranteed death sum assured.amount of time. If you die within the term of the contract then the sum assured will be paid to whoever you name as benificiary on the policy. Decreasing Term Assurance This cover is suitable to be taken alongside a repayment mortgage, the intial level of cover will decrease each year in line with the reduction in your mortgage.

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Permanent health insurance

Known as income protection makes up income lost through illness, accident or disability. Rates vary according to the dangers associated with one’s job, age, state of health and gender but PHI is thought to be of particular value to the self employed who do not have an employer to continue paying their salary if they are unable to work.

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Critical Illness Cover

A critical illness policy pays out a lump sum if you are diagnosed with one of a number of specified 'critical' illnesses during the term of the policy. Many life insurance companies offer policies that cover you for both death and critical illness and will pay out the guaranteed benefit on the first event to happen.

This is set up with a term specifically matching your mortgage term – say 25 years. The policyholder is covered for the term for the amount of their mortgage repayments as long as they keep on paying the premiums.

You need to read the small print before buying any protection policy as there will be exclusions, such as self inflicted injury or dangerous sports. An Gow's IFA can point out and explain the small print of each type of policy. There is a further choice of protection policies that can be used to protect your income and the financial cost of any loan, mortgage or other financial commitment you may have.

Accident Sickness and Unemployment (ASU)

can be taken out for any purpose to protect your income and to give you peace of mind. The benefits normally only pay for one year on a valid claim if you have an accident, are ill or become unemployed.
Most of these protection policies operate a 'deferred period' which is the period from when an event happens, that you can claim for, to when the policy starts paying out. You need to check the policy wordings carefully to ensure the policy matches your financial protection needs.

The choices available

With so many policies available on the market and benefits that can often overlap between individual policies it is vital to get independent advice and guidance to guide you through this hugely complex process. It’s clear that choosing the right mix of financial protection is not simple, particularly when there are so many providers and products. Among the decisions you need to make are:

how much cover should I have? for a specified term or for the whole of the insured’s life?
which protection policies should I have?
which fund is most suitable?
which provider is the most appropriate?
do I need critical illness cover and/or income protection?

Term Assurance
Decreasing Term Assurance
Family income Benefit
Whole of Life Assurance
Permanent Health insurance
Critical Illness Cover