Some Life Assurance Need To Knows

Life assurance may sound simple but it’s important to know what cover you need and how to set it up, so your loved ones don’t get caught out if the worst happens!

1. Opt for guaranteed premiums if you can afford it as this means your premiums will be fixed for the term of the policy. Reviewable premiums are cheaper at the start but cost more over the longer term.
2. Disclose all health conditions and risks when you apply, or your insurer may not pay out on a claim. Life Assurance is underwritten, and applications will have various questions based on your health, smoker status, occupations and even dangerous hobbies.
   Quotes /Illustrations are based on ‘standard rates’ which assume no health issues or risks to the insurer. If you are considered a higher risk the premium offered to you could be higher than a quote. Financial advisers have access to underwriters so can usually pre-vet an application for you and find the best insurer for you.
3. Set up your policy correctly! Depending on your circumstances and the reason for your cover there are different ways to set up the cover. Single life, joint life first death or joint life second death are common options but you can also have a ‘life of another policy’ where one person owns the policy but another is insured and you can also place your policy in trust for others on your death.It is particularly important to get the policy set up correctly if you have a partner or children and are not married or are using it to protect a mortgage. Placing a policy in trust is fairly easy and ensures that the policy pays out directly to your beneficiaries and outside of your estate.

Question – You are a couple with joint ownership of a house and have a joint mortgage but are not married, you take out two single life policies (no trust) to cover the mortgage and pay it off if one of you dies before the end or the mortgage term. If the worst happens who will the policies pay out to?

Answer – The policy will pay out to the deceased’s estate, so if there is a Will then the money will be distributed as per the Wills instructions. If there is no Will then the rules of intestacy are followed in this order of potential beneficiaries… Spouse, Children, Parents, Siblings etc. The partner is not entitled to anything if not included in a Will.

Solution – If you place the life Assurance policies into Trust for the benefit of your partner then it will pay out to them. Its free to set up a Trust and most are now flexible so you can change the beneficiary.

If you need help or advice with any area’s of financial planning please contact me, Claire Blake on 07767 308783 or claire@bdfinancial.co.uk or www.blakefinancialplanning.co.uk