Protecting what matters

Those dearest to us, and those financially dependent upon us

If something should happen to you, the last thing you want is for you or your family to be worrying about money. One of the most important aspects of your financial planning should be to ensure that you’ve made provision for your family and any dependants in the event of a serious illness, injury or untimely death.

Financial planning is not only about fulfilling our needs and aspirations, but it is also about protecting those dearest to us, and those financially dependent upon us. Of course, illnesses and deaths are not things that we like to think about, but failing to protect against such eventualities can have severe consequences for our loved ones, from struggling to pay the mortgage to a potential Inheritance Tax bill. Here are just some of the policies that need to be considered.

Life assurance Generally speaking, anybody with dependants or an outstanding mortgage should look at taking out a life assurance policy. At the very least, this should cover any borrowing and ensure the family can keep their home, but preferably it should provide an additional sum to help cushion the shock to your family finances at such a difficult time.

The level of cover should match your specific circumstances, which means it’s crucial to choose the right term and sum to insure. And by putting the benefits paid on death into an appropriate trust, this can be a very useful way of ensuring they are passed on to the intended beneficiaries at the right time. The proceeds also won’t form a part of your estate when considering any Inheritance Tax liabilities.

Income protection Being unable to work can quickly turn your world upside down. These policies typically pay out between 50% and 60% of your salary, tax-free, if you are unable to work due to illness or injury. They are an essential form of cover for those with dependants, but the terms and conditions vary – some pay out until retirement or death, others until you return to work. Almost all will only pay out once a pre-agreed period has passed, ranging from three months to a year.

Some policies will also only pay out if you cannot return to your own occupation. Others pay out only if you are incapable of doing any job. So it’s important that you obtain professional financial advice to make sure the right policy is put in place for your needs.

These plans typically have no cash-in value at any time, and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Critical illness This cover gives you the comfort that, should you face a terminal diagnosis or a specified critical illness, your policy pays out a tax-free lump sum as opposed to an income. Critical conditions include suffering a heart attack, stroke and certain types of cancer – but each policy will have its own definitive list.

Typically, the proceeds are used to fund paying off a mortgage and any other debts, or they could be used to pay off school fees that are no longer affordable or to provide a financial legacy.

IF THE PLAN HAS NO INVESTMENT ELEMENT, IT WILL HAVE NO CASH-IN VALUE AT ANY TIME AND WILL CEASE AT THE END OF THE TERM. IF PREMIUMS ARE NOT MAINTAINED, THEN COVER WILL LAPSE.

CRITICAL ILLNESS PLANS MAY NOT COVER ALL THE DEFINITIONS OF A CRITICAL ILLNESS. THE DEFINITIONS VARY BETWEEN PRODUCT