Many people prefer not to think about life insurance for the same reason that they prefer not to think about Wills. But for breadwinners and the self-employed it should be a given serious consideration.
Life cover should be the first priority, but terminal illness could be even more costly financially; and advances in medical science now offer much greater prospects of survival from conditions which in the past often proved fatal – for example, stroke, cancer and heart disease.
Three main types of protection are available:
1. Life cover, which pays out a lump sum in the event of death
2. Critical illness cover, which pays either a lump sum or monthly amounts in the event of the insured person being diagnosed with any one of a wide range of specified illnesses
3. Income protection, which provides a monthly income in the event of the insured becoming unable to work on account of sickness, accident or disability.
The amount of cover should be based on the financial loss which is likely to be suffered but this is likely in practice to be balanced by personal budget constraints.
Life policies should usually be placed in trust, to avoid the proceeds being included in the deceased’s estate and becoming subject to inheritance tax. Also, the benefits can be paid quickly to the beneficiaries, and the payout can be made without having to wait for Probate.
Sums insured should be reviewed periodically to ensure that they reflect the changing circumstances of the insured.
To find out more, contact us today.