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Life Assurance Print E-mail
Life Assurance                                                                                                                                                                                                                                                                                                                                                                                                                    Life assurance may be taken out due to a wide variety of reasons;                                   
  • Part of Inheritance Tax Planning. 
  • Pay a debt for example a mortgage
  • Provide protection for other family members, i.e. spouse and children.
  • Provide protection for businesses – for example keyman/directors/shareholders and partners
Essentially there are two different types of life assurance policies; those which offer protection only and those which have an investment content as well. Protection only policies, often termed as term assurance, will pay out on death within a specified period but do not have either a surrender value or Maturity value, whereas an investment linked life assurance policy, for example whole of life policies and endowment plans, have an investment content which often will provide either a surrender value or a maturity value at the end of the terms.  Such plans may be written on a single or joint life basis.  Couples would naturally feel that a joint life, first death policy would be the most economic, however this is not always the case and of course if the policy is being used as part of an Inheritance Tax plan it should be written on a joint life second death basis.  Should a claim be made on a life assurance policy the proceeds will be paid out free of Income Tax.  However, if the policy is not written in trust the proceeds may form part of your estate for Inheritance Tax purposes which could result in an Inheritance Tax liability. An easy solution is to ensure that the life assurance policies are writtten in trust. If you have dependants it is important to think about the affect on them if you were to die prematurely.  The obvious thing to think about is to ensure that any debts are repaid, for example a mortgage. Once all the debts have been repaid would £50,000 be enough? – Remember there are other bills such as council tax, gas. electricity, food, etc.  It has been suggested by the insurance industry that an adequate amount should represent around 20 times your salary.  It is assumed that this lump sum if invested at a rate of 5% per annum will provide sufficient income to replace the loss of earnings.  This of course does not take into account future potential earnings and career prospects.

Life Assurance

As life assurance plans vary, it is not simply arranging for a sum of money to be paid out on the event of an untimely death.  There are many other factors for you to consider.  Let Fehnert Financial Services Limited guide you through the maze of life assurance products and help you find what really would suit your circumstances.

 

 
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