Financial products are sometimes at their most useful when they are protecting our families, our incomes or our property.
There are many ways in which a family can protect itself, and because of the large range of products available there is usually an appropriate policy for most circumstances, and most budgets.
Life Protection Options.
Most people take out life insurance to provide for their families and alleviate any financial worries at a difficult time.
Level Term Assurance pays a lump sum in the event of death during the term of the policy. The benefit is paid tax free (under current legislation). Premiums are usually monthly, and fixed throughout the term. Because the term and benefit are known from the outset, and there is no investment content, term assurance is a very cost-effective method of protection.
Decreasing Term Assurance works similar to Level Term Assurance, but the benefit is set at outset and gradually decreases over the term of the policy. These policies can be used as cover for a repayment mortgage, or other loan where the amount of capital outstanding also decreases over time. Because the benefit reduces over time, the premiums are kept very low.
Family Income Benefit works the same as term assurance but instead of paying a lump sum upon death, it will pay a regular monthly tax free income in the event of death to your dependants up until the end of the term of the policy.
Critical Illness is usually available as an addition to all term assurance plans but can be bought on a stand alone basis. Critical illness generally allows for the lump sum benefit to be paid also in the event of diagnosis of certain critical illnesses and conditions. Most providers conform to the Association of British Insurers standards for qualifying illnesses.
Income Protection Options.
Income Protection. This policy is designed to provide a tax free income in the event the insured individual is unable to work due to ill health. The level of premium will depend upon benefit and term selected and most policies cease to pay the benefit once the insured is able to return to work. Income Protection policies are usually written to age 65.
Accident, Sickness & Unemployment (ASU). ASU policies were traditionally sold to accompany mortgages, allowing for a regular income to be paid to the insured should they be unable to work (or lose their job). The product can be split down, and unemployment cover is usually the optional extra available for an additional premium. It is important to compare ASU and Income Protection closely as one may be more suitable than another.
Keyperson / Shareholder protection. Businesses may want to protect the key employees within their firm - perhaps the key salesperson, or the IT manager without whom the business will not function properly. Keyperson protection can provide a fixed sum should the individual be unable work, or even die. The benefit will be designed to cover the firm's expenses in meeting any emergency costs, recruiting a replacement employee and protecting the future of the business.
Similarly, if a key shareholder was to pass away, the firms remaining shareholders or directors may want to purchase the deceased's shares from their estate promptly to maintain control of their business.
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