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Kirk Rice Blog

Life AssuranceWritten on May 12, 2016 by Peter Sharratt

Financial Services Questions

The Question:

Myself and my husband need to put in place Life Assurance as we have just had our first baby. What type of policies are available and would you have a specific recommendation.

Peter Sharratt answers:

I do not know enough about you to determine which policy would be right for you, I can however summarise your options. Broadly, there are two types of Life Assurance Policy to consider. The first is a Whole of Life Policy which has no set expiry date (hence the title). This type of policy will usually have the highest premium for any given level of sum assured (cover). The premiums and sum assured are often reviewable and you may have to increase the premiums in the future to maintain the sum assured at the same level or reduce the sum assured to the keep the premium the same.

The second type of policy is Term Assurance. This has a fixed term as determined by you at the outset and the longer the term the higher the premium. The premium and sum assured, once accepted, are normally guaranteed (some policies are reviewable). There is a variety of Term Assurances available, including a Level Term Assurance where the sum assured remains the same (an option can be added for it to increase each year, the premium will also increase). A Decreasing Term Assurance where the sum assured reduces (typically used to cover a mortgage) and Family Income Benefit Policy, where the sum assured is paid as a regular income rather than a lump sum. All will usually allow you to add further features, generally for extra cost such as a Waiver of Premium, which means if you are unable to work due to accident or ill health the premium after a pre-agreed waiting period will be paid by the insurer. Most policies include Terminal Illness benefit at no extra cost.

If you are diagnosed with an illness likely to result in death within 12 months the sum assured will be paid early. This benefit is not normally valid in the last 18 months of the policy term. As well as Life Assurance you should both consider Critical Illness Cover. This pays a lump sum if you are diagnosed as suffering (and it meets the policy conditions) from one of the serious illness’s covered such as Heart Attack, Cancer etc. And, Income Protection which pays you an income should you be unable to work due to accident or ill health. Overall, given the exciting change in your circumstances, it would be sensible to have a review of your current protection needs with a Financial Adviser. In the meantime you may find our Financial Protection for You and Your Family guide useful.  Click here to view the guide

Any reader interested in discussing this topic further can telephone Peter Sharratt on 01344 875000 or email peter.sharratt@kirkrice.co.uk.

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