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When life means life

Archive for the ‘Protection’ Category

When life means life

Wednesday, January 29th, 2020

Some people object to insurance on the principle that it may not provide any tangible benefits: an insurance policy only pays out if the event occurs that it’s designed to protect against. If your house doesn’t suffer fire, flood, subsidence or other damage, your house insurance won’t pay out. And so on.

Of course, many such policies provide peace of mind and reassurance, which surely has some value. But it must be agreed that many types of insurance never pay out. Your house may never suffer damage. And even though term assurance is a type of life assurance, if you don’t die within the period specified, it won’t pay out either.

However, there is one type of insurance guaranteed to pay out: whole of life protection. This type of life assurance runs for your whole life; and as death is unavoidable, it will pay something sooner or later.

This provides you with the peace of mind that your family won’t suffer financial stress due to your death, whenever it occurs. But this type of policy also has other uses. You can combine it with term assurance to cover particular debts. It can also be used as part of estate planning by providing money that can help with Inheritance Tax bills. It can even have value for businesses: when used as so-called key person cover, it can protect a company from the financial consequences of losing a vital employee, partner or director.

Whole of life protection comes in various forms. In essence, though, there are two types of cover: maximum and balanced cover. With maximum cover, the initial premiums and the sum insured don’t change for the first 10 years. Thereafter, the premiums may go up depending on various factors – such as the performance of the life fund in which the premiums are invested.

Balanced cover plans aim to keep the original premium level for however long the policy runs for. However, premiums still might rise if the fund doesn’t perform as well as anticipated, or if charges go up.

How much does whole of life cover cost? The premium rate depends on a number of factors: your age, how much cover you want, your sex, whether you’re a smoker, and your state of health at outset. However, because whole of life cover is guaranteed to pay out eventually, it will tend to be more expensive than term cover which might not pay out anything.

You can bolt on some extras to increase your security. One of these is critical illness cover. While life assurance only pays out on your death, critical illness plans pay their sum assured following diagnosis of a specified serious illness; and the money can be used however you want. Waiver of premium might also be worth considering: this will pay your premiums for you for a set period if you’re unable to work due to illness or accident.

As always, it’s worth discussing your circumstances with a trained and qualified financial adviser to make sure you buy the plan that best suits your needs.

Most households struggle after 7 months if a mother can’t work

Thursday, October 26th, 2017

Recent research carried out by Scottish Widows has found that three quarters of UK households would only manage to cover their bills for seven months if the income of the woman in the family was lost through death or illness. In addition to the financial ramifications, women spend almost an entire day (23 hours) each week carrying out household chores and caring for children, which the family would struggle to carry out or pay for were she no longer there to do these vital tasks.

Despite these statistics, Scottish Widows discovered that less than a third (31%) of women in the UK have a life insurance policy, with less than one in ten (7%) holding a critical illness policy. The most popular reason for women not taking out such cover is them not seeing it as a financial priority or simply not believing that it was needed. More worryingly, over half (54%) of the women surveyed did not have a will in place.

The survey also asked what would happen should a partner find themselves out of work for six months, with a quarter of respondents stating they would have to rely on state benefits to cover household expenses. 68% of the women surveyed admitted to not being able to save for the long-term future due to the need to pay for other things.

“One of the most important things a woman can give her family is security, but financial protection is still too far down the priority list because women simply don’t recognise their own value,” said Scottish Widows’ protection director Jackie Leiper. “It’s crucial that everyone – no matter what stage of life they’re at – considers whether they have the right protection in place to ensure their loved ones aren’t left coping with financial strain on top of emotional trauma if the worst were to happen.” Reacting to the findings of the research, Ms. Leiper also emphasised the “need to recognise the monetary value of women’s time and effort in the household, and to safeguard it accordingly.”

‘Protecting our families’ report – Aviva

Friday, April 7th, 2017

Aviva have just published their report into family finances including:

  • How families would cope in unexpected circumstances
  • Families perceptions of government support
  • The spending priorities of families

The key findings are worrying:

45% of parents with dependent children could not support their lifestyle for a month if the main breadwinner was unable to work.

Nearly one in four families (24%) have no savings to fall back on whatsoever and nearly one in five (18%) families could not reduce their monthly spending at all.

One in five (20%) of parents who have experienced a financial loss due to a health crisis don’t think they will ever recover financially or have no idea how long it will take.

You can find a full copy of the report here.