Are you protected in 2017?02 May 2017
Chapters Financial has noted an increase in enquiries, from both new and existing clients, about providing protection in the event of ill health or death. Life assurance enquiries range from family protection, protecting company assets in the event of the death of a director or key person, protecting against the effects of inheritance tax, to protecting maintenance payments in the event of a divorce. The needs are varied and we wanted to provide some notes for our blog readers to consider.
We appreciate that this is not a particularly happy subject to be blogging about in the spring sunshine; however, our experience shows that many people 'spring clean' their financial planning over this period.
In reviewing your financial planning, it is important to look what protection you currently have and to review what is needed.
Points you may want to consider first:
- Are your existing protection policies nominated to the correct beneficiaries and written in trust? Writing a policy in trust is valuable in placing the funds outside your estate for inheritance tax purposes and also means that the beneficiaries will receive the funds directly, without recourse to probate. If your spouse/partner also has benefits, do they know where they are nominated to?
- Does your employer offer Death-in-Service benefits and to what level? If so, would they know where you would want your benefits paid in the event of your death?
- Does your employer protect your income in the event of ill health, and do you know how this works? You might want to check your employment contract or speak to your HR department / manager. This is normally in the form of income replacement, rather than Critical Illness type plans.
- Make a Will to ensure that your wishes are detailed.
- What type of cover do you have and how long will it protect you for?
- Are your existing policies still suited to your needs? Life does not stand still and changes in your circumstances over time may mean that your protection cover needs to be adjusted.
- Is the life policy you have written in trust? It is usually worthwhile achieving this and can normally be achieved at nil/low cost.
As examples, there are various types of life cover you might want to consider to meet your needs, such as:
- Level Term Assurance: pays a single lump sum in the event of death within a set term.
- Decreasing Term Assurance: pays a single lump sum (decreasing in value each year) in the event of death within a set term. This would usually be used for an outstanding repayment mortgage.
- Gift Inter Vivos policy: usually applied for to cover an Inheritance Tax liability on a gift made from an estate.
- Family Protection plan: pays an agreed lump sum each year for a set period.
This is not an exhaustive list; however, it does provide a flavour of the varying covers that might be considered, to suit circumstances and budgets.
Medical underwriting is usually applicable when cover is applied for. This means that the provider of the policy may write to your doctor to obtain your health records or may ask your doctor to provide a written report following a medical examination. This is not always the case, and some applications will be accepted without the need for medical underwriting. However, it is worth bearing in mind that the majority of cases will require medical underwriting and to be aware that this can take some weeks to achieve.
As noted at the start of this blog, our experience shows that each protection enquiry is different and specific to a client's needs.
If you would like advice on the ways in which you can protect your family in the event of death or ill health then please contact the team at Chapters Financial, who will be able to help you further. No individual advice is provided during the course of this blog.
If you would like to receive further information regarding your own situation and circumstances, please contact the Chapters Financial team.
Vicky Fulcher Dip PFS
Chapters Financial Limited
Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.