Life Insurance

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Life Insurance

Life insurance is intended to provide financial security for your partner and family in the event of your death.

We offer comprehensive advice on correctly setting up life insurance policies and ensuring that it will act in the way you intended it to do so at a time of need.

As independent insurance advisers, we can search the whole insurance market to find the products that best meet your needs at the most competitive premiums.

The four main forms

Mortgage protection – usually set up to decrease in line with your mortgage amount and term. Usually, critical illness is attached, as this is the most cost-effective way of having what would otherwise be a prohibitively expensive illness cover.

Family Protection – usually set up to provide an amount of money which remains the same throughout the selected term, to ensure your family can maintain their lifestyle once the mortgage payment is made or to replace lost retirement provision due to early death or simply as a legacy.

Inheritance Tax (IHT) Protection – set up to cover a known IHT liability on death with no specific term.

Business Protection – set up to allow remaining shareholders/company to purchase back the value of their share in the business from your estate benficiaries or to cover the costs of replacing key personnel.

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How much is too much?

While it is rare to have too much life cover, care must be taken that life insurance proceeds would not fall into your estate on death and increase the estate value over the inheritance tax band and thus become taxable at 40%. This could be dealt with by simple trust forms and our financial advisers can help you ensure the right planning is in place, whatever happens.

The most important aspect of protection is that you need a level of cover that is appropriate for your circumstances at a price you can afford. Having life cover over the amount of your mortgage loan is also desirable, as this protects your loved ones from the worry of other expenditures in life and can also help to ensure your dependants have sufficient income where expected pension funds have not had time to grow sufficiently due to an untimely death.

Covering Inheritance Tax

If there is a known inheritance tax liability then an insurance policy can be taken out to cover the liability to protect the beneficiaries. There are two ways of doing this:

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A Whole of Life Policy

A whole of life policy insures the total liability, where the date of liability (death) is an unknown, a whole of life policy can be affected which will ultimately pay out on death. There are three forms of whole of life policy a”guaranteed policy” “maximum life cover” and “balanced life cover”

“Guaranteed Policy” is a fixed premium and fixed sum assured with no investment element.
“Maximum life cover” is initially cheaper as most of the premiums go towards life cover, the rest is invested. However, there will be a 10-year review at which time the premium will increase, sometimes substantially.
“Balanced cover” is initially much more expensive but is unlikely to increase in price at the review as part of the premium is used towards increased costs as you get older.

Seven-year rule / Gift intervivos policy

If a gift is given this value will not leave the estate for 7 years, which leaves a potential liability over this period. A 7-year insurance policy covering the tax liability of the gift will cover the tax liability immediately. A gift intervivos policy will reduce in line with the 7-year rule making the insurance policy cheaper – however, this only works on gifts over the nil rate band, any gift up to the nil rate band must be insured on a 7-year level term. This is because when gifts are assessed, they are used to fill up the Nil Rate Band first where taper relief is not a factor – therefore only gifts above the Nil Rate Band receive taper relief.

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