Protecting your family and business
Life Assurance
An Assurance Policy can be written in various forms but at its most basic level it will pay out a lump sum on the death of the policyholder(s). Some policies will allow a payment to be made if the policyholder is declared terminally ill, which of course would be in lieu of payment on death.
Probably the most common reason for effecting a Life Assurance Policy is to cover the amount of a mortgage on a property. It used to be standard practice for a mortgage lender to insist that a Life Assurance Policy was taken out with the Policy assigned to the lender. There are other personal financial needs that require Life Cover, such as ensuring that the death of the breadwinner does not affect the lifestyle of the surviving family. Life Assurance cover can also be used to pay an Inheritance Tax Bill, ensuring that the deceased's estate passes to those intended.
Life Assurance cover can also be used in business. A bank may insist that Life Assurance Cover is taken out to cover a business loan. Life Assurance Cover and its uses are discussed in the Business Planning Section.
There are many different types of Life Assurance Policies but essentially they either have a specific Term, such as the length of a mortgage, or last for "Whole of Life". The various policy types include:
- Level Term Assurance
- Decreasing Term Assurance
- Mortgage Repayment Assurance
- Renewable Term Assurance
- Reviewable Term Assurance
- Convertible Term Assurance
- Whole of Life Cover
- Family Income Benefit
- Inter Vivos
In certain circumstances placing the benefits of a Life Assurance Policy in Trust can be advantageous, as the proceeds are paid directly to the Beneficiary and would therefore bypass the estate. The main advantages of this would be to avoid Inheritance Tax and ensure the monies are paid without a lengthy delay.
For full details on the different types of cover, or if you would like a quotation please contact us.
Critical Illness Assurance
It is not only Death that we have to plan for financially. Critical illnesses and disability can have devastating effect on our finances. In circumstances it can be argued that Critical Illness Assurance may be more important than Life Cover. With the advances of medical science, the human race is living longer. We are now surviving many illnesses that would have been fatal, not so long ago. Nevertheless, they can still have a huge impact on our ability to work and enjoy life.
Critical Illness Cover should not be confused with Income Replacement Policies, as on diagnosis of a Specified Illness or Disability it will pay out a lump sum tax-free. It only does this once although some policies can pay out the lump sum in stages, but this has to be chosen at the outset. Like Life Assurance and Income Replacement Policies premiums and contributions to Critical Illness policies do not receive any tax relief, but the benefit is tax free.
Careful consideration has to be given in choosing the level of cover that is needed. Factors influencing this would be the loss of earnings, medical and care costs and when retirement benefits could be taken. Normally, this lump sum would be used for paying off a mortgage or possible modifications to the family house e.g. an access ramp for a wheel-chair.
Critical Illness Assurance can be a 'stand alone' plan or it can be added to a Life Assurance Policy. Critical Illness Plans are often used in conjunction with Income Replacement Policies to maintain the policyholder's current lifestyle, which could never be achieved by reliance on State Benefits.
There are a core number of illnesses that product providers cover, although some product providers will cover additional illnesses. A core list is provided below:
Core Critical Illnesses
- Cancer
- Coronary Artery by-pass surgery
- Heart Attack
- Kidney failure
- Major Organ transplant
- Multiple Sclerosis
- Stroke
Additional Critical Illnesses
- Aorta Graft Surgery
- Benign Brain Tumour
- Blindness
- Coma
- Deafness
- Heart Valve replacement or repair
- Loss of Limbs
- Loss of speech
- Motor Neurone Disease
- Paralysis/Paraplegia
- Parkinson's Disease
- Terminal Illness
- Third Degree burns
Source: ABI "A Guide to Critical Illness Cover"
Income Protection
Income Protection cover is designed to provide an income if the Policyholder is unable to work, through Accident or prolonged Illness, and will be paid until either the Policyholder returns to work, dies or the policy reaches the end of its term.
The Benefit is paid tax free if the client has taken the policy out individually. Alternatively if the cover is provided by the Employer a higher amount can be selected but it will flow through the Payroll system. The benefits are usually restricted to 55% of Earnings plus any State Benefits. It is not possible to cover 100% of Income, as there has to be an incentive to return to work.
The cost of cover depends on a number of factors such as: age, gender, occupation, state of health and family medical history. Obviously, the higher the benefit required the higher the cost; however, this can be reduced by the amount of time the client needs to wait for the benefit to be paid. This is known as the deferred period, which is usually set at 13 or 26 weeks after the illness commences, though it can be shorter if required.
This type of cover is often used along with Critical Illness Assurance which will provide a lump sum; the Income Protection Policy maintains the client's income.
At Brewin Dolphin we are able to research most Life, Critical Illness and Income Protection Policies for your needs and obtain illustrations upon request.
Long Term Care
Long Term Care in recent years has been a growth industry. As we are now conquering illnesses or managing disabilities that we would not have survived in the past, we are now an increasingly ageing population. This requires quality care facilities for our elderly
Long-term care refers to care you need for the foreseeable future, maybe as the result of permanent conditions such as arthritis, a stroke or dementia. It does not apply to care you need to recover from short illnesses or convalescence during such illnesses. Care could mean help with activities such as washing, dressing or eating in your own home or in a care home (residential or nursing). If you need long-term care you should check with your local authority about the support they give.
This presents a dilemma for our elderly and their families. For those that do not have substantial assets the cost of care may be paid for them by the the local authority in full or in part. You may also qualify for Disability Living Allowance if you are under 65 or Attendance Allowance if you are 65 or over. But the care component of neither Disability Living Allowance nor Attendance Allowance will be paid if the local authority helps with the cost of care.
Also, although social security benefits are the same throughout the UK, other help provided by local authorities varies across different regions. And of course, State benefits can change from time to time.
This means that for a large part of the population, Long Term Care costs will have to be met by themselves. Long Term Care Provision can help to provide a Tax Free income to pay for care at home, at a Residential Home or Nursing Home. This can be pre-funded by paying monthly or single premium insurance plans or by Long Term Care Bonds, where there is an investment element that is designed to pay the costs of Long Term Care Premiums. Long Term Care Provision can be bought at the point of need, through an Immediate Needs Care Plan. As the name suggests this provides a regular income to the Care Provider in exchange for a lump sum. Long Term Care Provision helps to take away the financial strain of providing care and preserve assets accumulated through life that were intended to pass to family on death. It does not take long for the costs of care to severely reduce the value of someone's estate.
Long Term Care is a complicated area and requires specialist advice.