Life Assurance

Thinking about what will happen to your loved ones when you’re no longer around is an emotional subject. It can be hard to plan ahead for this time but, by doing so, you can have peace of mind that they will benefit from financial protection.

At Trinity Finance, we make putting life assurance in place as easy and stress-free as possible for you. Our mortgage and protection consultants are adept at arranging affordable cover to ensure your loved ones are adequately looked after when you’ve passed away. They can help you to decide on the sum that’s to be paid out, explain the types of life assurance you can choose from and guide you on how this cover compares with other forms of financial protection. Once you’re happy with the plan details, your life assurance policy can be set in motion.

What is life assurance?

Life assurance is a form of insurance that provides indefinite cover and pays out a lump sum to your loved ones in the event of your death. As long as you continue to pay your premiums, you can rest assured that a payout will be made no matter when you die — there’s no expiry date for your life assurance policy. Due to the continuous nature of this cover throughout your life, life assurance is also called whole of life insurance.

How does life assurance work?

When arranging your life assurance cover, you need to decide on the amount you wish your loved ones to receive after you’ve passed away. This amount determines how much your premiums are, along with additional factors, such as your age, health and lifestyle. You need to maintain the premium payments for the cover to continue although some insurance providers allow you to stop making payments when you reach a certain age, which is usually around 85. As a payout is guaranteed to your loved ones, this type of insurance tends to have higher premiums than others. You can increase the level of cover provided by your policy if you wish, which will also increase your premiums. You cannot decrease it, however.

Types of life assurance

There are two types of life assurance to consider — balanced cover and maximum cover.

• Balanced cover: With this standard life assurance cover, your premiums remain the same during the entire policy. This is even the case as you age and your health starts to decline. The insurer will pay out the pre-agreed fixed amount of money to your loved ones when you pass away.
• Maximum cover: With this type of cover, your premiums are invested in a fund that’s linked to your policy. Every month, your money is invested with the aim of meeting the cost of the future payout. If the investments perform well, you can build up a bigger pot to be paid out. However, if they underperform, your insurer may take steps to rectify this. Your monthly premiums may be increased to cover any losses so that the amount of cover is maintained. Alternatively, your premiums may stay the same but the amount to be paid out will be reduced. Whilst the premiums for maximum cover may initially be cheaper than those for balanced cover, there’s a risk that they may increase significantly over time.

How does life assurance differ from life insurance?

Life insurance and life assurance are often confused. Both of them provide your loved ones with financial support after you die. However, there are some key differences between them.

• The length of cover: As mentioned earlier, life assurance lasts for the rest of your life. This means your loved ones receive a lump sum whenever you pass away, whether that’s 5 years after your cover starts or 30 years later. Life insurance, on the other hand, only covers you for a specific term. If you die within the policy term, your loved ones receive a lump sum. If you die outside of the term, your loved ones don’t receive anything. This is why life assurance is usually the more expensive option.
• Application restrictions: You can apply for life assurance at any age and don’t usually need to have a medical to be accepted. Life insurance, however, may not be an option when you reach a certain age, such as 60. This is because you’re considered to be more of a risk to insurers the older you are. You may also be required to have a medical before being approved for a life insurance policy.
• Flexibility: Life assurance isn’t as flexible with its levels of cover compared with life insurance. You can increase your life assurance cover if you wish but you cannot decrease it, which you can with life insurance. You do, however, have extra flexibility with how your life assurance premiums are used as you can opt to invest them. This potentially creates a bigger payout amount for your loved ones and isn’t an option with life insurance.

Is life assurance or life insurance better for you?

Whether you decide to take out life assurance, life insurance or even both types of cover depends on your circumstances. Should you wish to provide for your family if you die unexpectedly, life insurance is a better option, especially if you have young children. You can specify the amount to be paid out and the length of the policy term. This is good if you want to allow for key situations. For example, you may wish the policy to run until your children are old enough to be financially independent. You may just want a large debt, such as your mortgage, to be repaid. This prevents it from falling to your loved ones to pay when you’re no longer around. In this case, decreasing term life insurance is a good option.

Life assurance, on the other hand, ensures your loved ones receive a payout no matter when you die. As such, they have a guaranteed inheritance. As a life insurance policy only pays out if you die within the term, the premiums are more affordable. Life assurance, however, provides you with peace of mind that your loved ones will definitely receive a payout. This factor alone may make the more expensive premiums worth it to you.

Both types of policy are ideal for covering an inheritance tax bill, providing the policy is written in trust. This ensures the policy falls outside of your estate. Your loved ones can, therefore, access the money without having to wait for the probate process to complete.

Get expert life cover advice

Our mortgage and protection advisers are here to provide you with impartial advice on both types of life cover to help you make the right decision. Located throughout Kent, London and Edinburgh, they can discuss your circumstances and protection goals before guiding you on the level of cover to provide for your loved ones. Just give us a call on 01322 907 000 when you’re ready and benefit from an expert, tailored service to put the best life cover in place for you. If you prefer, contact us by email at info@trinityfinance.co.uk or via our contact form. One of our protection consultants will reply to you as quickly as possible with further information.

How much does life assurance cost?

One factor that affects the cost of your life assurance policy is the size of the amount to be paid out. To decide this, think about your reasons for having life assurance and what your loved ones may need to use the money for. Do you have an outstanding mortgage or other debts to be repaid? Would they be able to maintain their everyday living expenses? If you have children, consider the childcare costs and ongoing education costs. Maybe your loved ones could use some help paying for your funeral costs. Or you may be concerned that they’ll be faced with an expensive inheritance tax bill. They may not need any financial help at all but having life assurance is a way to ensure you leave them a legacy.

Your age also affects the cost of your life assurance. The older you are when taking out your policy, the more expensive the premiums will be. It’s best, therefore, to start your cover as early as possible to benefit from lower premiums. These will stay the same throughout your cover, even as you age and are at more risk of developing health issues. Your health, family’s medical history, occupation and lifestyle are other factors that determine the cost of your life assurance. If you smoke, for example, your premiums will be higher.

The pros and cons of life assurance

As with any type of insurance, there are pros and cons to consider before deciding whether life assurance is the right financial protection for you and your loved ones.

Advantages

• There’s no expiry date for your cover. This means you don’t need to worry about extending your policy or starting a new one.
• As the policy continues for the rest of your life, your loved ones are guaranteed a payout no matter when you die.
• You can have peace of mind that your loved ones will have financial security after you’ve passed away.

Disadvantages

• You can increase your cover but cannot decrease it.
• The premiums for life assurance tend to be higher than for other types of life cover.

Can you cash in your life assurance early?

Some insurance providers allow life assurance policies to be cashed in early so check this before taking out your policy. When cashing in your life assurance, you will usually receive the level of payout amount that has accumulated at that point. However, be sure to find out what the penalty fees are for doing this. They tend to be high so you risk receiving less than you’ve already paid in.

Are life assurance payouts taxable?

Neither income tax nor capital gains tax is payable on a life assurance payout. However, if your estate has a value that’s higher than £325,000, inheritance tax is charged at 40% on anything above that threshold. One way to prevent this from happening to your life assurance policy is to write it in trust. This keeps it separate from your estate so that it’s not subject to inheritance tax. As mentioned earlier, this also means your loved ones won’t have to wait for probate to be granted before they can access the money.

Do you need life assurance?

If you’re still not sure whether life assurance is right for you, don’t worry. Our mortgage brokers are here to discuss your situation and provide you with impartial advice on this and the other types of financial protection available. Life assurance gives you peace of mind that your loved ones can either cope financially when you’re no longer around or gain financial freedom from the payout. As this cover continues throughout your life, you don’t need to worry about the policy ending and your loved ones being left without a payout should you die afterwards. However, you need to ensure that you can continue paying the premiums into retirement so that your policy remains active.

Provide financial protection for your loved ones with life assurance

At Trinity Finance, we understand how emotional it can be to put cover in place that helps your loved ones after you’ve passed away. Our mortgage and protection consultants are highly experienced in arranging life assurance and strive to make the process as easy and stress-free as possible for you.

Give us a call on 01322 907 000 to speak with one of our protection specialists about the level of cover you prefer for your loved ones and whether balanced or maximum cover is best for you. An affordable and tailor-made life assurance plan can be put in place as soon as you’re ready so that you can feel confident your loved ones won’t struggle financially after you’ve passed away.

If it’s after office hours, simply email us with your details at info@trinityfinance.co.uk or via our contact form. We’ll reply to you as quickly as possible with more information about our comprehensive life cover and estate planning services.