Sound personal insurance advice
In preparing any financial plan it is important to recognise that the Welfare State provides no more than a basic safety net. Over the years Social Security benefits, which are generally linked to inflation, have failed to keep pace with the growth in earnings.
An essential component of a good financial plan, therefore, is to accommodate any disaster, should it occur. The main types of policies to consider are:
· Term assurance or family income benefit – provides a lump sum or income to your family if you were to die prematurely
· Mortgage protection – a special term assurance policy specifically designed to pay off the outstanding mortgage
· Permanent Health Insurance – provides your family with an income if the main breadwinner is unable to work due to an extended illness
· Critical Illness insurance – provides a lump sum if you were to contract a critical illness
There are also other types of policies used in the mitigation or funding of inheritance tax including:
· Gift Intervivos – a specialist term assurance policy designed to pay the inheritance tax on a gift where death occurs within 7 years
· Whole of Life – a policy that pays out on death whenever that occurs, which can be a useful way of funding the final inheritance tax liability
Remember too that placing a policy in a suitable Trust may not only reduce your tax liability but also ensure that the right people will receive the benefits and that they are paid out as quickly as possible.
Assessing your precise protection needs will form part of your financial planning alongside policy selection and implementation.