Guaranteeing an Inheritance for your Beneficiaries.

Guaranteeing an Inheritance for your Beneficiaries.

(Disclaimer – Please note that this article doesn't constitute advice as individual circumstances will dictate suitability. All information and suitability should be discussed in detail with a suitably qualified adviser, accountant or solicitor)

Using a Whole of Life policy to provide an inheritance may not always be the first benefit considered when using this type of product. More often, Whole of Life policies are used for Funeral Planning or indeed Estate Planning (to potentially cover an Inheritance Tax liability).

However, using a Whole of Life policy to provide a GUARANTEED Inheritance may work really well for certain people.

My business buys in a lot of Life Insurance leads as part of our business plan and when getting to speak to client’s it can lead to numerous different conversations based around Life Cover, products and costs. One recent conversation I had was as follows:

Male client aged 62 made an enquiry regarding £100,000 of Life Assurance. After speaking to the gentleman about his concerns and the basis for his initial enquiry, it became apparent that he wanted to leave a sizeable lump sum for his family, namely two sons, on death.

After discussing the advantages and disadvantages of Term assurance, my client decided that type of policy wasn't suitable as the end of the policy term may likely finish before making a claim.

Therefore, my client wanted something that would guarantee to pay on death. So, I quoted a Whole of Life policy to provide a guaranteed sum assured of £100,000.

The premiums offered by various Insurance Companies ranged from £142 – £201 per month, payable for the rest of my client’s lifetime. My client’s first reaction was to say it wasn't value and he would be better to pay the money into a savings account (and/or investment).

Then, we looked a little more closely at the figures. Taking an annual premium of £175 per month (£2,100 annually) Life expectancy for male aged 62 is expected to be approximately 78 Calculating annual premium X life expectancy to age 78 = £33,600 in premiums payable. Calculating annual premium X life expectancy to age 94 = £67,200 in premiums payable. Now lets look at the returns should £175 per month be invested into a low risk Cash Isa @2.5% annual interest. (Obviously, greater returns could be achieved but may contain an element of RISK.)

16 years returns £ 41,261 (to age 78)
32 years returns £102,781 (to age 94)

As we can see, if the client paid into a low risk, tax efficient contract up to average life expectancy the return would be £41,261.

However, If my client was to die, the Whole of Life contract would pay £100,000 (a difference of £58,739)

On death your ISA investment would make up part of your estate and depending on your total assets may be taxable. As part of a whole of life policy written into trust for your beneficiaries, the sum assured would fall outside of your estate and therefore not be part of your potentially taxable assets and any sum assured would not be taxable in receipt to your nominated beneficiaries.

This analogy can also be considered if you have existing savings. In effect, you could release regular payments from existing savings to fund a Whole of Life policy. In fact, if your estate is considerable and potentially subject to Inheritance Tax, then your payments could be classed as gifted and not subject to taxation under the 7 year rule.

Hopefully, some of the benefits of Whole of Life policies outside of their general use have been highlighted and we would genuinely love to discuss further if of interest. www.belcapinsurance.co.uk

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Differences between LTA and DTA (Discuss)

Questions I often get asked is what are the similarities between level term insurance and decreasing term insurance and what are the differences.

They are both types of life assurance and they both payout a lump-sum if you were to die during the term of the policy. The main difference between the two is that level term insurance remains (as the title suggest) level so if you are insured for a £100,000 pounds for 20 years the policy would payout £100,000 pounds should you die at any time during the 20 years. 

The decreasing term insurance (as the name decreasing might suggest) decreases over time so if you started off with £100,000 pounds over 20 years with full cover on day 1, by the end of the term the policy that would be reduced down to zero.

The main usage for decreasing term insurance is to protect a payment of a repayment mortgage (capital and Interest). That is the type of mortgage where you pay some capital and some interest each month so by the end of the term you owe nothing. So your life insurance needs to mirror that repayment schedule of your mortgage loan.

One positive about decreasing term insurance is the premiums are lower because as you get older and your chance of dying gets higher the level of cover reduces so the premium is lower.

So, to recap, Level Term Assurance remains the same sum assured throughout the policy term and is generally used to provide life cover to pay a lump sum to your beneficiaries should you die (family insurance cover). Decreasing Term Assurance is generally used to cover a loan such as a mortgage. Level is more expensive than decreasing.

Oh, by the way both type of policies really need to be written in Trust. To know why please visit http://belcapinsurance.co.uk/uncategorized/life-assurance-trust/

Whole Life Plans for Funeral and Estate Planning

When most people think of traditional life insurance they think of term life insurance.

Term life insurance policy span a set number of years during which the insured party pays a fixed premium based on his or her age, current state of health and pay out an amount of the policy.

The alternative to this type of term life insurance is whole of life insurance (WOL). A whole of life insurance policy covers the insured party from the day of the policy begins until his or her death paying out a guaranteed sum of money to the policy holders beneficiaries. As such this type of WOL policy is often used for Funeral Plans and Estate Planning.

A portion of whole of life insurance premiums are invested by the insurer with any earnings intended to help offset the rise and costs of insuring the policy holder. Here at Belgravia Capital Insurance we recognize that making an informed life insurance decision requires having all of the available information and the ins and outs of whole of life insurance can seem complicated.

By breaking whole of life cover down to its basic components we hope to help you decide if whole of life is the right life insurance for you. We specialize in helping our clients find the right life insurance.

When you are ready to begin your search for the whole of life insurance that is right for you we are ready to help you find the perfect policy for your lifestyle and your family. In connection with our advised Whole of Life plans our clients can also enjoy a fantastic discount, from one of our partners,to produce a Last Will and Testament.For further info http://belcapinsurance.co.uk/rewards/