Posted January 25, 2023

Starting a family and buying a first home is typically the nudge that most households need to first consider protection/life cover. Generally, at a younger age it is prudent to have protection in place to cover your residential mortgage against death and critical illness, with perhaps some additional life cover for family protection, and then a policy to replace your income against the risk of long-term ill health.

As time progresses, families typically will pay off their mortgage borrowings, and their children grow up and become financially independent. At this point, especially when the last mortgage payment is finally made, many people begin to consider whether they still need life insurance/personal protection in place.

The answer, as always, is that it depends upon your financial position. We have put together some points to consider if you are currently going through that thought process:

• Are you still working, or is your partner still working? If so, and your household is reliant upon those incomes, then looking at income protection or critical illness cover would be a great way to secure those incomes against any health changes.
• Is your partner reliant upon your pension income? Most defined benefit/final salary schemes will offer a widow’s benefit, but this will be typically 50% of the full pension- would this cause any financial difficulties in running the household on a 50% reduction in income? On a similar theme, it is not unusual at all for ordinary annuities to simply cease upon death of a policyholder- in this position would your partner still manage financially?
• Death of a partner is always a traumatic event and can involve a long period of re-adjustment to a totally new life. A simple life insurance policy, written into trust, could help your grieving partner take an extended break from work without having to worry about paying the bills or returning before they are ready.
• Funeral costs run into thousands of pounds and it can bring reassurance to many people that, should the worst occur, there is access to a pot of money to make sure that this last expense is fully funded and does not cause additional distress to the household at a very sensitive time.
• If you are a carer for your partner, you are providing an indispensable service that would be very costly to replace if you were to not be able to do this anymore. Life cover, and potentially critical illness cover, can ensure that should you not be able to care for your partner any more, they have the financial means to arrange this care privately and maintain their existing lifestyle.
• Whilst your mortgage may be repaid, which is a huge achievement, do not over look other borrowing you may have in place. From personal loans and credit cards to car leases/HPI agreements and beyond, life cover can provide valuable protection to ensure that your family would not have to take care of this on your behalf.
• Blended families are now commonplace. You may have children from previous relationships that you would wish to leave something to if the worst should happen, and yet typically you may wish to leave the family home for your current partner to remain residing in. A life policy here, written into trust for your beneficiaries, can be a very cost effective solution to this issue.
• Inheritance tax is a growing issue for many UK households. With the nil-rate band for a married couple being set at £650,000, your estate above this level can be taxed at up to 40%. Again, a simple joint life plan written into trust would form a very effective solution to settling probate and paying the bill, without having to take monies intended for your beneficiaries from your estate.

We’re currently the UK’s No 1 Protection Advisor of the Year! We’re a small team and you’ll be given your own dedicated adviser, someone who’s a protection expert, for you to call, email, visit or text.

We are not all about selling, we review your situation regularly, using our understanding of the complexity of critical illness plans and medical conditions.

By seeing the whole picture and knowing your financial goals we can really add value and help you with your broader life plan.

For a general chat call the protection team on 01270 620555 or click here to get a quote.