Inshore Independent Financial Advisers   278 Lymington Road   Highcliffe   Christchurch   Dorset   BH23 5ET

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   Financial Protection Guide

Family Protection

What is Life Insurance?

It's a straightforward and affordable way of helping make sure that your family and loved ones are financially secure in the event of your death.

A life insurance plan pays out a cash lump sum if the person(s) insured dies during the term of the plan. The lump sum can be used to provide financial support to your family and loved ones, who might otherwise struggle to pay the mortgage, bills and other living expenses without your income.

Having the right level of life assurance in place gives you peace of mind and your family a financial safety net if they ever need it. There are different types of life cover, so it's important to pick the right type for you.

What is Level Life Insurance?

It's a Life Insurance plan where the amount of life cover stays the same for the duration of the policy term. It could be the right sort of life insurance to choose if you want to provide a specific amount of money for your family and loved ones.

It's also suitable to cover an interest-only mortgage, where the outstanding mortgage loan remains the same for the term of the mortgage.

What is Decreasing Life Insurance?

It's a Life Insurance plan where the amount of life cover reduces during the plan term. It could be the right sort of life insurance to choose if you want to cover a repayment mortgage or other loan because, as the outstanding balance of the loan reduces, so does the amount of cover. This means you only pay for the amount of cover you actually need.

Is Family Income Benefit cheaper?

Rather than providing a lump sum should you die, family income benefit provides a regular, tax-free, monthly income for you and your dependants - from the time of the claim to the end of the plan term.

Family income benefit is particularly attractive to those who like to know they have a regular monthly income and would rather not have to worry about complex investment decisions to make the most of a lump sum payout.

Why do I need Critical illness insurance?

Critical illness insurance will pay you a tax free lump sum on diagnosis of any one of a wide range of specified illnesses including certain types of cancer, heart attack, stroke, brain tumour and many more.

Diagnosis of such an illness would be a major trauma in your life, but you would still have to meet your financial commitments.

Critical illness policies can vary greatly in the cover they offer. A basic plan covers the most serious conditions, but a comprehensive plan covers many more including loss of sight, total permanent disability and hearing loss.

Should I put my policy in trust?

Placing your policy in trust is important if, on your death, you wish the proceeds of your life insurance to be paid to your dependants quickly and efficiently.

A Trust allows you and others to control what happens to the money after your death. At the outset, you decide who is to benefit and in what proportion. The advantage of this is the money is passed directly to your beneficiaries, without reference to your will or the taxman. It speeds up the process of getting the money to your beneficiaries by, on average, six months.

A Trust is also key if you wish to avoid falling into the Inheritance Tax trap.

Trusts are very easy to arrange, and Inshore IFA does not charge for setting them up on behalf of our clients. For the vast majority of situations, the most sensible thing is to put your life insurance policy in trust.

What if I can’t work due to sickness accident or disability?

This is known as permanent health insurance and this type of plan is designed to replace your salary and will provide a tax-free income if you are unable to work through disability. The policy pays a monthly tax-free income until you recover - right up to retirement date if needs be and the payout can be level or set to rise with inflation.

The maximum cover you can have is typically half of your gross income but as it is paid tax-free it should mean that you can maintain a similar level of take home pay. However, some employers provide this cover as part of your overall employment package - so check these details first.