Family Life Insurance

Life Insurance pays out on death, securing your loved ones a benefit to see them through such difficult times.

Use a policy to protect an outstanding mortgage, leave a cash lump sum or replace your income – whichever would be best for your family.

Include Critical Illness Cover to protect against the risks of illnesses such as heart attack, cancer and stroke.

What Does Family Life Insurance Cover?

• Death
  Should you pass away during the life of your policy, it will pay out a tax-free cash lump sum (or an income, depending on the type of insurance) to your beneficiaries.
• Terminal Illness
  The vast majority of Life Insurance policies will pay out early if you’re diagnosed as terminally ill (usually defined as having fewer than 12 months to live).
• Critical Illness
  If you add Critical Illness Cover and Life Insurance together, you get a policy that will pay out not just on death but also if you’re ever diagnosed as critically ill.

There are a number of different policies you can use to provide your family with security after your death.

Family Income Benefit

Although Family Income Benefit is one of the lesser-known Life Insurance products, it’s nonetheless a powerful planning tool to ensure your family can maintain fiscal stability long after your death.

While other Life Insurance products pay out a lump sum, Family Income Benefit will pay out a regular income for a set period.

Mortgage Insurance

Mortgage Life Insurance is a form of Term Life Insurance that covers you for the outstanding mortgage debt for the set term of the loan.

If you die during the policy’s term, the insurance pays out  so your loved ones don’t have to worry about how they’ll afford to stay in the family home.

Whole of Life Insurance

Whole of Life Insurance is designed to cover you until your death, whenever that may be. It’s therefore designed to insure your family for obligations that won’t be cleared over time, such as funeral expenses or inheritance tax bills.

Do I Need Family Life Insurance?

It’s not something that anyone wants to think about, but while the risk of death is fortunately relatively low for a healthy person in the UK today, it’s still a factor you need to consider when looking to protect your family.

The point of most Life Insurance policies is to protect you for the long run, say over the length of an entire mortgage.

When you examine the likelihood of you passing away over a much longer period, the risk rises.

Given the relatively inexpensive cost of life insurance versus the cost of leaving your family unprotected, it is often a no brainer to have suitable cover in place to provide a financial lifeline should the worst happen.

Youth is no protection…

Younger people might feel that they have no need for Life Insurance and in the short-term this may be true.

The risk of death for a healthy, 30-year-old man over the next 10 years is 1 in 85. However, when you extend this period to 25 years, which is around the typical length for a mortgage, the risk rises to 1 in 18.

What is Family Income Benefit?

The Life Insurance most people are familiar with pays out a tax-free cash lump sum on the death of the policyholder.

However, there’s another type of Life Insurance for families that may be more useful – Family Income Benefit.

It is designed to provide a continuation of the policyholder’s income into the household, potentially protecting your family’s financial future for years or decades.

You can also include Critical Illness Cover on the policy, so the insurance will kick in if you’re diagnosed with a serious illness such as heart attack, cancer or stroke.

Adding Critical Illness Insurance to Family Income Benefit may not always be the best option to protect your income. Income Protection tends to be far better suited for this purpose as it covers you if you’re off work for any medical reason.

Of course there may be instances where adding Critical Illness Cover to FIB makes sense, but it’s a complicated area. Talking it through with an expert such as one of the team at Drewberry can help.

Why Family Income Benefit?

Receiving a one off lump sum to manage ongoing financial commitments can be quite a daunting task.

If costs spiral it could feasibly be eaten up quickly leaving your loved ones with financial worries and a shortfall to make up, everything the life insurance was supposed to prevent.

Providing income continuity…

Family Income Benefit will provide a continuation of income rather than a lump sum.

The end date usually aligns with the age your youngest child can reasonably be expected to be financially independent.

Family income insurance is commonly used where you have a more precise idea of your family’s financial outlay going forward, such as where you need to cover school fees.

It’s also popular if you have older children as beneficiaries, who may use any financial freedom they have to spend a lump sum unwisely.

Don’t forget, if you’re in a household where there’s one breadwinner and a stay-at-home parent you may have to consider insuring both partners, not just the income earner.

Stay-at-home parents sacrifice their own income to work in the home providing childcare and housekeeping services which would otherwise have to be done by someone else.

Samantha Hafffenden-Angear
Independent Protection Expert at Drewberry

Mortgage Life Insurance

When asking yourself if you need Mortgage Insurance, consider one question: Would your family be able to stay in their home if you died before repaying the loan?

These days, most mortgages are joint and rely on two incomes. How would your family cope if they suddenly lost one of those incomes, especially if it was the main income?

If you’re concerned that your loved ones may have to sell up and move out in the event of your death and want to insure the family home by covering the mortgage, Mortgage Life Insurance may be the option for you.

How Does Mortgage Life Insurance Work?

Mortgage Insurance is a type of Term Life Insurance, which is split into:

• Decreasing Term Insurance
• Level Term Insurance

What is Decreasing Life Cover?

Decreasing cover can run alongside a mortgage. The term is set for the same length of time as the mortgage and the amount you’re covered for falls over this period alongside your outstanding loan, reaching zero by the end of the policy.

It’s important to make sure your Mortgage Life Insurance interest rate isn’t higher than the interest rate on your mortgage.

If it is, then your Life Insurance may not be able to cover your entire mortgage should you need to make a claim. Speak to an expert to avoid this pitfall.

Sam Barr-Worsfold
Independent Protection Expert at Drewberry

What is Level Cover?

Level Mortgage Life Insurance is also set for a specific term, although unlike decreasing cover the benefit remains the same throughout this period.

It’s therefore particularly well-suited to interest-only mortgages, where the outstanding amount you owe remains fixed over time.

Others use Level Life Insurance to provide a fixed lump sum above the amount owed to the mortgage lender, leaving extra money to their family to cover costs such as bills or funeral expenses.

Comparing the two, as the amount you’re covered for falls over time with decreasing cover, it will often be cheaper than level cover.

What is Whole of Life Insurance?

Many people have heard of Whole of Life Insurance without even realising it. Over-50s Life Insurance is a specific form of Whole of Life Cover.

In insurance terms, a Whole of Life policy does exactly what it sounds like it will do – cover you for your whole life, right up until your death.

All you need to do is continue paying the monthly premiums until you pass away.

This is compared to Term Insurance, which only covers you for a set period of time and then ends, perhaps long enough to cover a mortgage debt or another outstanding loan.

Whole of Life Insurance is sometimes referred to as Whole of Life Assurance because it protects against an event that’s assured to happen, i.e. your eventual death, rather than an event that may happen during the policy’s term.

Given that you definitely secure a payout from Whole of Life Cover providing you keep paying the premiums, it’s often used to cover items you know will be need such as for inheritance tax purposes or funeral expenses.

Over 50s Life Cover for Funerals

Whole of Life Cover is often used to cover funeral expenses. Given this, a funeral can be our last major expense, one we want to protect our families from having to pay out of their own pockets or having deducted from their inheritance.

Whole of Life Insurance and Inheritance Tax

You can also use Whole of Life Insurance to spare your family from the entire inheritance tax bill on your estate.

To save your family from going through the hassle and expense of covering the bill out of their own pocket or taking out an executors loan to pay the bill to release the estate, a Whole of Life Insurance policy written into trust can be used to cover an entire inheritance tax bill.

Get Expert Advice on Life Insurance for Your Family

Drewberry’s team of expert advisers arrange cover to protect clients’ families every day, so we’ve got a wealth of Life Insurance tips and tricks to pass on to make sure you get the best deal.

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

• There is no fee for our service
• We are independent and impartial
  Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
• We’ve got bargaining power on our side
  This allows us to negotiate better premiums for you than you going direct yourself.
• You’ll speak to a dedicated expert from start to finish
  You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
• Benefit from our 5-star service
  We pride ourselves on providing a 5-star service, as can be seen from our 2097 and growing independent client reviews rating us at 4.92 / 5.
• Gain the protection of regulated advice
  You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
• Claims support when you need it the most
  You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.

The way we work means we never charge you a fee for that advice – you effectively get all of our experience for free.

Our advisers are here to help so please do not hesitate to pop us a call on 02084327333 or email help@drewberry.co.uk.

Tom Conner
Director at Drewberry