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Life & critical illness protection

Taking out a life insurance policy can put financial provision in place for your family in the event of your death.

You have three main life insurance options:

  • Whole-of-life insurance
  • Term assurance
  • Critical illness cover

Home insurance

While buildings and contents insurance may sound straightforward it is important to remember that the cost of replacing everything that you own at the same time could be financially crippling for you and your family.

Income protection

Income protection is a long-term policy that is designed to pay a regular income should you develop an illness or injury that prevents you from earning. It will continue to pay out until you are able to return to work, retire, or until the policy ends.

Financial protection planning can bring peace of mind in the event of the unexpected happening.

We often underestimate our own value. We insure our homes, our cars and our pets but we forget about life protection and insuring our incomes.

Deciding what type and level of insurance to take can be a challenge, especially without the right advice.

A Fairstone financial planner can provide you with independent financial insurance advice and help you find the products to protect your specific needs and circumstances.

Financial protection - your key questions, answered

What is whole-of-life insurance?

This policy has no fixed term and the cover will remain in place until death provided that you continue to pay the premiums.

Whole of life policies, which pay out a lump sum at the time of death are often considered as a means of insuring against post death liabilities including funeral costs and Inheritence Tax.

What is term assurance protection?

Term assurance may be suitable if you only need cover for a certain period of time, perhaps until your children have moved out, or a mortgage has been paid off.

You decide on how long you want the policy to last for. If you die during this time, it pays a tax-free cash lump sum to your loved ones. However, if you live beyond the end of the term, your plan will have no cash value. There are different types of term insurance available including:

  • Level term assurance
  • Decreasing term assurance
  • Family income benefit

Do you pay income or capital gains tax on a life insurance policy?

While the proceeds of a life insurance policy won’t usually attract income or capital gains tax, it will form part of your estate and may therefore be subject to Inheritance Tax. Putting an insurance policy into trust at the outset means the proceeds will be paid directly to your chosen beneficiaries in the event of your death, rather than to your legal estate, and will not be taken into account when Inheritance Tax is calculated.

Do I need critical illness cover?

Critical illness cover can give you the peace of mind that if you unexpectedly fall ill, you will receive a tax-free lump sum to help you cope financially.

The definition of critical illness, and the conditions covered, will vary greatly depending on the policy. It is important to understand exactly what a policy covers before you agree to the terms. For example, some policies will not include certain types of cancer as they are considered by some insurers to be easily treatable. An independent financial adviser can explore all of your options for you, searching the whole of the market to find the policy that’s right for your specific needs and requirements.

How do I know if I'm under-insured?

If you own a high value home, more often than not, this can mean higher value repairs in the event of damage.

Similarly, if you own a farm or country house you will need more than a simple home insurance policy as you will need to take machinery, land and livestock into consideration.

Protecting what matters

Financial protection planning can bring peace of mind in the event of the unexpected happening, meaning you and your family can remain financially stable and maintain your current standard of living.

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