Different Types of Life Cover

Q: What is term Assurance / whole of life Assurance?

A: Term assurance is another form of life cover, term assurance would generally pay a lump sum in the event of the death of the insured within a specific term.

Whole of life is another form of life cover. Whole of life cover will continue to provide life assurance until a claim is made on the policy, this type of plan has no fixed term.

Life assurance advice

There are many different types of life assurance contracts and many options.

At Boudica’s we recommend seeking advice from a professional advisor. We provide expert advice on all types using the U.K.’s leading life assurance companies. We will review the best possible options to fit your needs and financial circumstances.

Family income benefit / Family life cover / Mortgage life cover

Family income benefit / Family life cover / Mortgage life cover Benefits?

A: Family income benefit is a type of life assurance that pay’s out a regular income if a life assured dies. Benefits are then paid monthly to the beneficiaries, until the end of the policy term.

Family income benefit is a cost-effective way of providing support to a family in the event of the death of a parent /policyholder.

Q: How does Family income benefit / Family life cover / Mortgage life cover work?

A: You decide what monthly benefit your family/loved ones would need each month if you were to die, how long this income would be required for. A Typical term may be until children reach a specific age of being financially independent i.e. 18, 21 or 25.

See Example: family requirement to live monthly is £2000 a month until your youngest child reaches a specific age, say 21 and is now 5. Plan term needed is 16 years with a benefit set at £2,000.

The plan is set up to pay £2,000 per month to your family in the event of your death until the end of the plan term chosen.

Q: Do you need Family income benefit / Family life cover / Mortgage life cover?

A: Losing a parent is devastating, and the effect on any family with children can cause both emotional and financial stress.

Many households never take the time to work out what the effects of losing a parent or guardian would be. However, it generally has a significant financial impact on those left behind,

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Q: Trusts for Life Assurance

Many life assurance contracts would benefit from being written in Trust; however, many policies are not set up with a trust in place.

A trust provides a legal wrapper around the life insurance contract, in short, a trust will pay ona claim quicker, mitigate inheritance tax and can ensure that the proceeds of the life assurance are paid to correct person or persons.

Q: What is a Trust?

A Trust is a legal arrangement which allows the owner of a life policy (the settlor) to give their policy to a trusted group of people (the trustees), who look after it. At some time,the proceeds will pass onto people from a group that the settlor has decided known as (the beneficiaries).

Q: Benefits of a Trust?

Inheritance Tax– It helps to ensure that any money paid out from the life policy would not be part of the deceased’s estate, helping to minimise death tax being paid or indeed increasing amount of tax due.

Quicker pay out– It should help to ensure that the money paid out from the life policy can be paid to the right people quickly without the need for lengthy legal processes (probate/ letters of administration).

Control of funds– By placing your policy in trust, you can indicate who you want theproceedstobepaidto.Atrustcancontrolwhenthemoneyfromthelifepolicywill be paid out. This can ensure that children receive some financial support from the money, but do not have full access to it straight away on death.

Q: Why Trusts are important?

Trusts are often over looked, and this can prove costly. By not arranging a policy in Trust, it may mean that up to 40% of the policy proceeds are liable to tax. This rather defeats the object of arranging Life Cover in the first place!

The other major advantage is that the policy proceeds can be paid almost immediately. In England and Wales when a person dies, the representatives need to apply for a Grant of Probate (if a Will is in place) or Letters of Administration (where there is no Will). The main purpose of this process is to see if any Inheritance Tax is due on the proceeds of your Estate. This process takes time and if you die without having made a will it takes even longer. Since the trustees are the owners of a policy placed in trust, they do not have to go through this process in order to make a claim.

Both processes take months and effectively means that the state will be ‘frozen’ so there may be little or no money available to those who need it.

For further advice speak with one of our professional advisers.

If you have a life assurance policy that is not written in trust. Boudicas land offer a free review service. We can review whether the plan would benefit from being written in trust. We also carry out an open market review to assess whether cover could be provided more cost effectively.

We do not charge for the setting up of a trust.

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