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Accumulating wealth is one thing, and it can seem like that alone should be enough to protect your family if something should happen to you. However, wealth and protecting your finances and the wellbeing of your family are very different things. You need to make sure that your family can cope if you become ill, incapacitated, or die.
Being prepared by taking out insurance with TrueCoverage insurance won’t do anything to ease the emotional impact of dealing with illness, an accident, or death, but it will provide money and more options at a difficult time when your family needs them most.
You can look at insurance as a promise to your family that there will be funds available for them to provide for the life that they want, even if you aren’t around any longer to help them, or you no longer have the ability to generate the income that you once did.
Here are a few ways to financially protect your family, in case the worst does happen.
Mortgage Life Insurance
First of all, most people have a mortgage to pay. If your mortgage is not yet paid off, it’s more than likely that you will want your family to be able to stay in the family home if you were to die and to be able to do so without worrying about how they will pay the mortgage.
If you have a capital repayment mortgage, you will need decreasing mortgage life cover in which the sum insured reduces with your mortgage balance. As an alternative option, level term life cover which pays out a benefit as a lump sum if you die within a set period of time is useful to cover an interest-only mortgage. If you aren’t sure which option is the best for you and the kind of mortgage you have, you could speak to a mortgage adviser or a financial adviser to help you explore the options and decide what will work best for your circumstances.
Family Income Benefit
A lot of people forget about the essential expenses that a family has to find the money for after they’ve paid for the mortgage. There’s no use in repaying the mortgage if your family still can’t afford to live in the house, due to other expenses like bills and maintenance. Family Income Benefit Life Insurance is a kind of life insurance that will pay out a regular income to cover these essential expenses that can easily mount up. It will cover things like utilities, food, clothing, school fees, and even some non-essential expenses like holidays. The amount of cover that you need will depend on your lifestyle now and the lifestyle that you want to try and maintain for your family.
Whole Of Life
While there is no inheritance tax between married spouses or civil partners, it may become payable if you choose to money to your children, or to a partner you were living with but weren’t married to. Do you want your family to get a reduced amount of inheritance from you because of the inheritance tax? Probably not, but there are things you can do.
One way to reduce the burden on your dependents is to take out a Whole of Life policy. A Whole of Life policy is a life insurance policy without a set term. This means that you can pay a regular premium in exchange for a lump sum when you die. This lump sum will be used to pay any inheritance tax, so your loved ones get the full amount that you intend to leave them in your will.
Writing Your Policy In Trust
All of the policies that have mentioned so far should be written under trust. There are several reasons for writing a policy in trust. Those reasons include:
- To make sure that the right person receives the proceeds
- To make sure that the proceeds do not form part of your estate, which means that they won’t be subject to inheritance tax, stopping your family from getting the full amount.
- To allow your beneficiaries to have access to the funds before probate is granted.
Critical Illness Insurance
This is a tax-free lump sum that will be paid out on the diagnosis of a specified critical illness. The top three critical claims are made for cancer, stroke, and heart attack. The benefit that is received from critical illness insurance could be used for things like repaying or reducing the mortgage, covering any additional medical expenses that are racked up, to help you to pay for the best medical treatment that you can, or to cover your family’s essential expenses like the bills or school fees while you’re recovering for your business. This coverage is especially important if you’re the main breadwinner in the family, but even if you’re not, losing your income would probably be a problem. Make sure you’re covered for being unable to work for a long period due to illness or injury.
Most people think about insuring things like their mobile phone, their white goods, and their boiler. However, the financial impact on your family in the event of claiming for something like this is usually limited to a couple of thousand pounds. Now think about what might happen if you couldn’t work for the next few years or even longer due to poor health? This would have a real impact on the lifestyle of your family. Income Protection is designed to replace your income if something was to happen that meant you were not able to work due to an accident or illness.
Most income protection plans come with a deferred or waiting period, which is the time until the claim is paid out. Three months is the most common waiting period. The benefit is usually up to 60% of your taxable income. There are now a few different periods available (how long the benefit will pay out for), which include:
- Full income protection which will pay a benefit after the deferred period until you are able to return to work, or you retire.
- Budget-type plans which pay a benefit for a maximum of 24 months, which come with a reduced premium.
A surprising amount of people don’t have a Will. A lot of people intend to get around to it, and keep putting it off because they don’t like to think about it.
If you don’t leave specific written instructions behind when you die, this means that your assets might not go where you want them to. This is especially a risk in the case of an untimely death.
A will is to identify your beneficiaries and your other wishes about your estate. Those wishes might include naming the people that you want to inherit specific items, like art or special jewelry. Having these clearly laid out could potentially prevent conflict amongst your family after you have gone.
If you have a Will, it’s easy to just forget about it and assume it’s fine. In fact, if you haven’t looked at your will in a while, it might not match your current wishes. If your will hasn’t been reviewed within the last decade, then your beneficiary list could be out of date and include people who are no longer in your life or may even be deceased themselves. In fact, a lot of people have Wills that are list a former spouse as a beneficiary. It’s surprisingly common to have large inheritances going to places where they were not intended.
To stop something like this from happening, make sure you not only have a Will, but that you review it every few years and update to reflect changes like a change in finances, a marriage or divorce, or the birth of new children or grandchildren that you’d like to leave a particular item to. Your Will can also include details like the guardians you would want for your children, and other important instructions for after you’re gone.
Whatever route you think might be the best one to provide for your family, it’s important to get advice. Protecting your family can be the most important decisions that you will ever make, so it’s important to get it right. An adviser can help you to tailor the policies available to better meet your individual circumstances and goals for your family and help you to select the best package available for what you need. They can also guide you through the whole process and to choose the right type of trust that best fits your financial situation. Once you have selected a policy to take out, you should review your choice with an adviser every two to four years to make sure that the plan you made still meets your needs. Review your policies again if your financial circumstances change, whether for better or worse, to make sure you still have the best options and coverage. Think of it as investing in your family’s future.