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

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.

Term assurance

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

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.

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.