Life Assurance

What is Life Assurance and Why is it Important?

Life assurance is a contract between a policy holder and an assurer, where the assurer promises to pay a capital sum on the death of the life assured to a specified beneficiary in exchange for a regular monthly premiums.
As you take on more responsibility throughout your life, the need for life assurance increases. Whether you are buying your first property, starting a family or even if you just wish to reduce the financial burden of your death on loved ones, life assurance is an effective and in some cases necessary financial planning tool to help cover the financial burden on your death.
Life assurance is a form of insurance that does not have a set term and is held indefinitely as long premiums are paid by the holder until a pay-out is triggered, usually in the form of a cash sum on death. Therefore, this could be considered life cover in its simplest form. The absence of a term limit also means that beneficiaries are almost guaranteed to be paid out upon the policyholder’s death, giving you peace of mind that those you care about will be fully taken care of.
As financial commitments grow the need for more sophisticated personal and family protection increases at which point independent financial advice is essential.
The financial services industry is awash with personal protection products designed to provide a range of benefits should a claim be made. However, for many the wide choice of providers and products are bewildering, therefore your SIP Wealth Management adviser is here to help you.

What Types of Life Insurance/Assurance Products are Available?

The range of products and types of cover available is wide, but some examples of the most common assurance/insurance contracts include the following:

Term Assurance
Term assurance covers a range of policies that have a set lifespan that usually covers a number of years. These can usually be grouped into three categories:

• Level Term Life Assurance
  An insurance policy that will pay out a fixed lump sum if the life assured dies during the term of the policy. The lump sum is fixed when the policy is created and will remain consistent throughout the entire life of the policy.
• Decreasing Term Assurance
  A type of insurance policy in which the level of cover decreases over the length of the policy, but with generally lower premium payments than policies with no term limit. The premiums will also depend on the length of the term agreed. Usually used to cover mortgage costs as they decrease over time.
• Increasing Term Assurance
  Simply the opposite to Decreasing Term Assurance. The level of cover increases over the duration of the policy. Sometimes used to cover costs of long term care for the elderly.

Mortgage Protection
A product designed to cover the costs of mortgage payments in the event of unexpected loss of job or an illness and ensure your ability to pay your mortgage is intact, meaning your home is protected from unforeseen circumstances.

Critical Illness or Terminal Illness Benefit
This insurance covers costs of treatment and can help to pay for medical bills when a policyholder is diagnosed with a critical illness, giving you the reassurance you need during such a potentially difficult time.

Whole of Life and Flexible Whole of Life Assurance
This form of insurance can either be similar to typical insurance in that a lump sum is paid out, or they can be “unit-linked” which means that the money that is paid will be split; with some used to pay for the insurance itself, while the rest is invested into an investment fund, meaning it has the potential to grow in value over time and that investment may eventually be able to cover the pay-out benefit.

Permanent Health Insurance / Income Protection
Nobody likes to think about the possibility of becoming ill to the point where we cannot work and look after ourselves financially; however thousands of people are prevented from being able to work every year and permanent health insurance or income protection can help avoid the potential following hardship. This form of insurance pays out a separate income intended to protect your standards of living if you were to become ill. The insurance will cover you until you are fit and healthy enough to return to work. If you were to die during the term, the insurance would also cover for that eventuality.

Private Medical Insurance
Private Medical Insurance is an insurance product created to cover the cost of private healthcare, if or when you should need it. This can be taken out either for just you, or for both you and your partner with a joint insurance policy thus simplifying your policies.

Trust Planning

Many of the above contracts can be written in Trust. Often provided free of charge by insurance companies a policy in Trust may reduce any potential Inheritance Tax liability on your estate and ensure policy proceeds reach your loved ones without the need for probate. Trusts can be specific (absolute) or very flexible in nature but by appointing Trustees to administer your policy your wishes will be carried out if the worst happened.
One of the main reasons many choose to take out Life Assurance policies is that it can be quite a tax-friendly option. This is because with some forward-thinking planning, the cash sum can be claimed tax-free when the time comes.

Whether buying cover for the first time or looking to review existing arrangements SIP Wealth Management can offer a range of independent financial services tailored to meet your individual needs.

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