Life insurance comes in various forms, explored in more detail on the following pages. Picking the best option depends on several things, like taxes, cost, and the coverage you need.
This website offers info and tools to give you a general idea of what's available, but it's just a starting point. To truly find peace of mind, we recommend getting professional, unbiased advice tailored to your specific situation.
Life insurance can safeguard your income, loved ones, and even your business. In some cases, it can even be structured to minimize your tax burden.
Whole of Life Assurance
Whole life insurance, as the name implies, lasts your entire lifetime. Unlike term life, which covers you for a specific period, whole life guarantees a payout whenever you die, making it more expensive.
Many whole life plans come with a savings element. This builds a cash value in the early years to help cover the higher costs of insurance later. While you might get a lump sum if you cash out the policy after a long time, it's not primarily a savings plan. The insurer uses the cash value to offset the risk of paying you out later. In most cases, even if the cash value runs out, the death benefit will still be paid. However, always double-check your policy details.
Premiums for whole life are usually fixed throughout the policy, but some plans may have reviewable premiums based on investment performance and might need adjustments.
Whole of Life plans and Inheritance Tax
Whole life insurance can be a tool to help cover inheritance tax (IHT) on your estate. It can be affordable, especially for younger couples considering joint life second death plans. These plans only pay out after both partners have passed.
Here's why it works: married couples typically don't pay IHT on each other's death. However, the entire estate becomes liable for IHT when the second spouse dies. A whole life policy placed in trust avoids IHT on the payout and provides funds for your beneficiaries to cover the tax bill.
This is just one strategy to consider if you anticipate a large IHT burden. We offer comprehensive tax planning services, including income tax, capital gains, and estate planning.
Term Assurance
Term life insurance is the most affordable and straightforward life insurance option. You choose a coverage period, like until your mortgage is paid off, and it pays out a benefit if you die within that term. There's no investment component - it's purely death protection. If you outlive the term, the policy expires.
Term policies come in two main flavors: level and decreasing. Level term keeps the payout amount the same throughout the policy. Whether you die early or late in the term, your beneficiaries receive the same sum. Decreasing term insurance pays out more at the beginning, gradually decreasing over time, often mirroring a mortgage balance.
Term payouts can also be structured in two ways: a lump sum or family income benefit. Lump sum payments are flexible, allowing your family to choose how to use the money. However, the amount may be impacted by investment returns at the time of your death. Family income benefit policies, on the other hand, typically cost less because the insurer's liability shrinks over time. For example, if you die in year 18 of a 20-year policy, they'd only need to pay income for two years. This type of policy also makes it easier to determine your coverage amount - simply consider the income your family would need to replace.
Business protection/cover
This deals with protecting your business from the adverse financial effects of the death of a key person, partner or shareholder. Business protection can be especially important to smaller companies whose reliance on key individuals for profit may be greater than large corporates.
There are two main types of business assurance, key man and partnership assurance / director share purchase.
Key Man
Is used to inject a lump sum of cash into the business in the event of the loss of a 'key person'. A key person may be a top salesman, or a key designer in a design company etc, someone whose death would have a direct and adverse effect on the company's income. The usual solution is a term assurance policy whose sum assured should be worked out with your financial adviser.
Partnership / Director Share Purchase
Deals with protecting the families and co-owners in the event of the death of one of the partners / directors. Each party agrees before hand the value of his or her share and a combination of term assurance policies and legal documents are put in place to ensure that in the event of a partner or shareholders death, the remaining co-owners have a sum in place to buy out the family of the deceased for a fair sum.
