Life Insurance: Are you covered?
3 protection products to help you protect your family if the worst should happen
We insure our cars, our homes, and even our holidays – but very few of us protect ourselves and our families against illness or death. Could your family pay your mortgage or debts if you weren’t around anymore? What would happen?
We’re going to cover Critical Illness Cover, Life insurance and Whole of Life Cover in a series of short blogs to help you to understand what they are, who they are designed for, and how they can help you. These are complex insurance policies, and when taking them out, you need to understand them. Why? Because they absolutely have to pay out when you need them to. Today we’re going to talk about Life insurance and Whole of life cover, how they’re different and why you might choose one over the other.
What is Life insurance?
Life Insurance is designed to pay a cash lump sum or monthly income if you die, or are diagnosed with a terminal illness, during the term of the contract. Life insurance is particularly important for anyone who has loved ones who depend on their income – like Ms B.
When Ms B sought advice from a Wren Sterling adviser, she had separated from her husband and he’d cancelled their life cover. Now uninsured, Ms B’s main concern was to provide for her child – if she were to die or become seriously ill and unable to work.
She wasn’t looking for the cheapest insurance – she wanted a premium that was guaranteed to stay the same, so that she’d be able to keep up the payments. We arranged her Life Insurance and Critical Illness Cover, so if she were diagnosed with certain critical illnesses or she were to die, there would be a lump sum which could be used to ensure that her daughter is cared for.
Ms B chose life insurance rather than Whole of life cover, because she wanted to be protected while she raised her daughter. It’s a more affordable type of cover because its temporary, and you can choose the length of cover.
How will Ms B ensure that the funds are used in this way?
During her conversations with her adviser, we found Ms B hadn’t made a Will – which is one of the ways she can stipulate how she wants funds to be used, or have the money placed in trust and managed by the trustee. We referred Ms B to her Building Society, as they could recommend one of their partners who could provide her support in this area.
So, what is Whole of life cover?
No one likes to think about what their death, but if you are concerned about your legacy, that your inheritance tax bill might force your children to sell off parts of your estate, or if you’re planning to leave your business to one child, the money from Whole of Life cover could be used to compensate your other children. Whole of life cover is designed to give dependants or beneficiaries a pay-out on the death of the person covered. This cover is often more expensive as the death benefit is guaranteed (as long as you continue to pay the premiums for as long as you live.)
Which one is right for me?
Whether you choose Whole of life cover or Life insurance will depend on what you value most, and the quotes you’re given – which will in turn depend on a number of circumstances (like you age, how much you want to be covered by, how much you are able to pay.) If you’re considering taking out one of these policies, it could be worth talking to an independent financial adviser like Wren Sterling. As an independent company, not tied to any provider. We’re able to scour the whole of the market to find the most suitable policies – which may not be on comparison websites.
More blogs in this series:
All names have been changed in order to protect the individuals, but are real examples of how our advisers have helped our clients.
Your home may be repossessed if you do not keep up repayments on your mortgage. The Financial Conduct Authority does not regulate taxation and trust advice and will writing.