Protection
Protection is the generic term given to products that pay a lump sum or income in
the event of certain situations. Most of us have insurance cover for our houses
and vehicles but it is also important to consider something at least as important,
insurance cover to protect you and your family.
We have set out below questions that we often get asked and details of the different
types of products that may be appropriate.
I want to ensure that my family has enough money if I die. How can I do this?
- Term Assurance
- Whole of Life
I would like to protect my income if I am unable to work. How can I do this
- Income Protection (also known as Permanent Health Insurance)
- Critical Illness cover
I would like to ensure that my mortgage is paid off if I die. How can I do this?
I would like my family to receive an income if I die. How can I do this?
- Family Income Protection Insurance
Term Assurance
This is a no frills life policy that simply pays out a specified lump sum if you
die during the term of the policy. This is the one of the cheapest forms of life
assurance. Claims are settled tax free. There is no investment element and so if
the policy is cancelled at any time the policy does not have a surrender value.
It is possible to get premiums that are reviewable and premiums that are guaranteed.
We recommend guaranteed premiums because the premiums will then remain the same
for the entire duration of the policy.
Whole of Life
This is a life policy which is designed to provide life cover for the rest of your
life, ie no fixed term. It contains an investment element and the premiums are generally
fixed for a specified period, typically 10 years and then reviewed. The future premiums
are based on the investment performance of the policy. If the policy is cancelled
early there may be a surrender value although you should not treat this type of
product as an investment. Whole of Life is more expensive than Term Assurance but
it can be a suitable option in certain situations such as inheritance tax planning
or for those who wish to ensure that life cover is available throughout their lifetime.
Claims are settled tax free.
You should note that Whole of Life polices which offer the cheapest premiums are
not necessarily the most appropriate. Cheaper premiums now usually result in more
expensive premiums at the review dates because less money is being used to fund
the investment element which is designed to keep premiums down in the future. Please
also note that these types of policy are often written in trust to avoid inheritance
tax. This is a more sophisticated type of life policy and we would recommend that
you seek advice before setting up a new policy.
Income Protection (also known as Permanent Health Insurance)
This type of policy provides an income if you are unable to work because of an accident,
sickness or injury. The level of cover is usually limited to 50%-60% of your income
but claims are paid tax free. There is a deferment period before any claims are
paid which you choose at the outset. This is usually anything from 4 weeks to 6
months. The longer the deferred period you choose, the cheaper the premium. In particular,
this type of cover should be considered by those who are self-employed and employees
who do not receive long term benefits from their employer if they are off work for
a long period of time.
Critical Illness cover
Critical Illness cover is designed to pay out a lump sum if you suffer a defined
critical illness such as cancer, heart attack or stroke. Claims are settled tax
free. It could be used to pay off a mortgage or other debts or to pay for any special
needs that might become necessary.
Mortgage Term Assurance
This is a special type of Term Assurance designed for repayment mortgages. The amount
owing under a repayment mortgage reduces over the term of the mortgage and Mortgage
Term Assurance is designed to decrease alongside the mortgage. It is effectively
a decreasing policy because the amount the Insurance Company would have to pay reduces
over the term. Premiums are therefore cheaper than ordinary Term Assurance. Claims
are settled tax free.
Family Income Protection Insurance
This too is a special type of Term Assurance. Rather than paying out a lump sum,
it will pay out an income for the remainder of the policy term if you die during
the period of the policy. The income is tax free. Again, it is effectively a decreasing
type of life cover because the amount the Insurance Company would have to pay out
reduces over the policy term.
The above list is by no means comprehensive. We are always happy to provide specific
advice based on your own personal circumstances. For further details, please contact
a member of our Financial Services department, whose details are give below.
If you would like to arrange an appointment to see one of our advisers, please e-mail
financial.services@chattertons.com
or contact Richard Ludlow on (01780) 764145 or Tim Barker on (01205) 351114.
Contact Details
Financial Services Team
Mortgages:
Your home may be repossessed if you do not keep up repayments on your mortgage.
Investments:
Investments and Pensions: Please remember that past performance is not necessarily
a guide to future returns. The value of units and the income from them may fall,
as well as rise. Investors may not get back the amount originally invested.
Equity Release:
Equity Release Mortgages: This is a lifetime mortgage. To understand the features
and risks, ask for a personalised illustration.
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