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Protection Information

Over the past few years many forms of insurance policies have become more competitively priced, especially life insurance. If you have a life policy which is several years old you may be able to change your provider for a more competitive premium, or to increase the benefit for the same monthly cost.

You should seek advice before cancelling any existing policies and ensure continuity of cover when making new arrangements. The information provides helpful advice guides that will let you find out how you can protect either you and your family, your mortgage, or your business.

Although Critical Illness cover is sold by life assurers, there is a big difference when compared with life insurance – you don’t have to die to benefit from the Critical Illness insurance policy. This type of cover is designed to pay out a (tax-free) lump sum in the event of you suffering from certain types of serious illness or if you have to undergo certain types of surgery.

The lump sum paid out by the Critical Illness insurance is to help with the extra costs incurred as a result of contracting a particular condition. It is important to note that the policy only pays out if you contract one of a defined list of illnesses specified in your policy. It is important to remember that if you contract an illness which is not covered by your policy you will not receive a payout.  These policies differ in what they cover, so you should always check the policy wording.

Unless you have substantial savings, some form of Critical Illness insurance may well make sense for you, particularly if you have any debt such as a mortgage. How much cover you should have depends on your circumstances. Consider the lump sums that you might need in the event of contracting a serious illness – being able to pay off the mortgage or making modifications to your home, for example. If you’re able to cover the necessary lump sums from your own or your partner’s savings, then critical illness insurance may well be unnecessary and it may be more appropriate to look at covering your income instead.

The size of your insurance premium will depend on your age, health, occupation, whether or not you smoke, the type of cover you need, and how long you need it for. It is important to remember that premiums could also be more expensive if you have a history of a particular illness in your family.

  • Flexibility
    Usually you’ll pay a set premium, for instance, with a term assurance policy meaning both your cover and your premium will be set for a certain period of time, however there are whole of life policies that can include critical illness cover which offer more flexibility such as the option to increase your cover over time. Which one we recommend will obviously depend on your personal circumstances.
  • Combined critical illness and life insurance policies
    Some policies will offer critical illness combined with life insurance. Again, care needs to be taken, as once the policy has paid out cover will no longer be available-in other words if the policy pays out for a critical illness then there will be no life cover remaining. Furthermore, if the illness has been a serious one then it may be that replacement life insurance cannot be obtained due to health reasons.If you do decide on one of these “bundled policies” make sure it covers both your critical illness and life insurance needs. Even though it may prove slightly more expensive, it may be worth considering separate policies for these different types of cover.
  • Total and permanent disability cover
    Many Critical Illness insurance policies will also include cover for ‘total and permanent disability’. This pays out if you become unable to work due to permanent disability arising from any illness or injury (regardless of whether it is listed in the policy).  If such cover is included, it is important to establish whether the policy will cover “any occupation” or “own occupation” .  Generally cover is more expensive if the plan is written on an “own occupation” rather than “any occupation” basis.  Please ask for advice on this important aspect of these policies.Whether or not it is a good idea to include this cover is debatable, as it may overlap with Permanent Health or income protection insurance. However there are differences, the greatest of which is that Critical Illness insurance pays a lump sum whereas income protection pays a regular income to meet your income needs.  In these circumstances people often prefer the lump sum so they have the flexibility to perhaps pay off debts. However, if finances allow there is nothing to prevent you having both forms of cover.

These types of plan will have no cash in value at any time, and will cease at the end of the term. If premiums are not maintained, then cover will lapse.

As confirmed above, these types of policy may not cover all definitions of a critical illness. For specific definitions please refer to the Key Features and Policy Documents.

Your home may be repossessed if you do not keep up repayments on your mortgage.

The Financial Conduct Authority does not regulate taxation and trust advice.

The name says it all. It’s term assurance, as you only get a payout within the set ‘term’ e.g. 18 years. It’s level, because the payout you get is fixed from the start of the term until the end. Level term assurance thus guarantees a known lump sum payout upon death within a fixed time e.g. £150,000 if you die within the next 18 years.

How Much Cover Do I Need?

The cover and ensuing cost depends on three things.

  • The higher the cover the more it costs. The amount of cover should take into account any outstanding debts and allow your dependents to maintain a reasonable standard of living. Do check though whether your employer provides a “death in service” benefit as this may provide a certain amount of cover already and may therefore reduce the overall amount required. If it does, deduct the amount it pays out from the total cover you need. Cover may also be needed for a non-working spouse or partner, especially when children are young, as if the spouse or partner died, the main earner may need to stop working. Level term is important protection for those who have children or a spouse or partner who would suffer financial loss if you died, but affordability also counts, so if the appropriate cover is too costly, it’s better to have some than none if it’s relevant.
  • How long should cover last. A policy intended to provide for children should last until they finish full time education, or for a partner until the earner reaches pensionable age. Don’t feel obliged to cover a round number of years e.g. policies may be for 17 years.
  • Your lifestyle can make the cost of cover cheaper. The amount paid increases with the likelihood of death within the term – age, health, being a smoker and having a risky occupation, can increase the price. Couples can have joint or separate cover.

As noted, couples can choose either separate policies or joint policies which pay out on the first death. However a joint policy would only be suitable if you needed the policy to pay out on the first person to die, as the cover would end at that point. Even if a joint policy does look suitable, it’s worth getting quotes for standalone policies anyway, as it may be cheaper.

If you die the life assurance payment will form part of your estate, which means that the value of your estate could be liable to Inheritance Tax. In many cases you can avoid this by writing the policy in trust – which means the payment(s) goes direct to your dependents, avoiding inheritance tax. This is relatively easy to do as most insurance policies include the option (and papers) for writing in trust directly, at no extra charge.

These types of plan will have no cash in value at any time, and will cease at the end of the term. If premiums are not maintained, then cover will lapse.



Mortgage Life Assurance is designed to pay off the remaining mortgage debt on repayment mortgages if you die within a set period. It ensures your dependents needn’t worry about repaying the mortgage if you die.

Is it worth having?
Most lenders strongly recommend you get a policy when you take out a mortgage. It is useful protection and, if done correctly, should not be too expensive. It should be remembered that Mortgage Life Assurance does decrease in line with the mortgage debt therefore should you wish to maintain a certain level of life assurance then Level Term Assurance may be more appropriate for you.

How Much Does It Cost?
Mortgage Life Insurance has no investment element as the payment covers the balance of the mortgage. So it’s usually a simple case of the cheaper the better.

Costs depend on you
Policy costs increase with mortgage size and length as well as the likelihood of your death during the term. This means age, sex and whether you smoke are big factors. For those who’ve quit smoking, once you’re clean for a year, it is worth a re-quote as the price may have reduced substantially.

Again if you already have a policy and you have stopped smoking ask us for a re-quote as we may be able to reduce your premiums. Some Mortgage Life Insurance policies also factor in health, occupation and participation in risky sports. So a 21 year old, non smoking office worker, who enjoys organic food and regularly visits the gym, will probably find their policy pretty cheap.

Consider writing in trust
If you die the life assurance payment will then form part of your estate. This may make the value of your estate liable to Inheritance Tax. In many cases you can avoid this by writing the policy in trust – which means the payment goes direct to your dependents, avoiding inheritance tax. This is relatively easy to do as with most insurance policies they include the option (and papers) for writing in trust directly, at no extra charge.

These types of plan will have no cash in value at any time, and will cease at the end of the term. If premiums are not maintained, then cover will lapse.

Trusts and Inheritance Tax Planning is not regulated by the FCA.

Whole of Life insurance guarantees to pay out in the event of death, whenever it occurs. For a given premium, cover is provided for your whole life. The premium you pay can either be purely for cover in which case it is guaranteed or it could also include an investment element which could provide a cash-in value should the cover no longer be needed in future.

How the Insurance Benefits are Paid For:

A premium is charged based on the cost of providing the cover, the client’s age and health situation. There are various types of whole of life insurance:

Whole of life With Profits – the premium includes an investment element which participates in the insurer’s with profits fund. The investment element can help reduce the effects on inflation but the bonus rate cannot be guaranteed. Once added to the plan the bonus cannot be removed. The cover is suitable for those who wish to provide a tax free lump sum on death, or those who have a potential inheritance tax liability. The cost of the cover is set based on the client’s age and health, and takes into account the insurer’s expectations of investment performance and expenses.

Unit Linked whole of life policies – the premium is split between providing for the cost of the insurance cover, and investing into the insurer’s funds in order to subsidise the cost of cover in later years. The value of the investments and income from them may go down. You may not get back the original amount invested.

There is a choice over the level of death cover – Maximum, Minimum or Balanced. This can be changed as required, throughout the life of the policy. Each monthly premium is used to buy units in a selected fund, then sufficient units are cancelled to pay for the cost of the life cover. The remaining units are invested depending on the level of cover chosen.

Maximum cover provides the cheapest cost of the insurance but includes only a minimal investment element. Minimum cover is the opposite, with greater emphasis on investment and little life cover. Balanced cover falls between the two with the ratio of sum assured to premium being aimed at maintaining the level of cover throughout the life of the policy. However it is dependent on the invetsment element growing at a sufficient rate. If the desired rate is not achieved either the amount of cover will be reduced or the premiums increased.

The premiums on a unit linked whole of life policy are generally reviewed after the first ten years, and more frequently thereafter. This is because the cost of providing life cover is more expensive as you get older. The aim of the premium review is to ensure that the fund value built up is sufficient to enable the life cover to continue at the same level, otherwise the premium would have to increase, or the level of cover would be reduced.

It will be appreciated that it is therefore possible to pay a premium within a wide range for a given sum assured.

If cover throughout life is needed with some assurance of the level of the premium, then balanced cover would be chosen. If the highest sum assured is required for the lowest premium, maximum cover (minimum investment) would be chosen.  If a low sum assured but a high savings element is needed, minimum cover (maximum investment) would be chosen.

At the end of an initial period (between 7 and 10 years) the insurance company will review the premium to sum assured ratio. Where maximum cover is selected, either the premium will increase significantly or the sum assured will reduce. Where balanced cover is selected the review will still take place, but only if the insurance company has failed to meet its target rate of growth will it be necessary to alter the premium or sum assured. Further reviews then take place, usually every 3-5 years. Flexible Whole of Life Assurance plans usually have other features that may allow the sum assured and/or premium to be index linked, or otherwise increased, in pre-determined stages.

Plans can be written on a single life or joint lives, where the sum assured is payable on the first death (or diagnosis of a critical illness) or on the second (usually used for inheritance tax (IHT) planning providing that the policy is written under trust).

Although these plans can accrue a cash value, they are not suitable for use as a savings vehicle, but to provide protection against death or illness. Where a significant fund is established, however, it is possible to use this to pay future premiums, so a plan could be made “paid up” with all future premiums being paid from the accumulated fund until this runs out. When the insurance is no longer required, one simply ceases to pay the premium. A surrender value may then be payable.

Whilst traditionally Whole Of Life plans are able to accrue a cash value, non-investment linked Whole Of Life plans are also available in the marketplace. Generally these plans tend to be more competitive in terms of premium as they do not accrue a cash value.

The value of investments and income from them may go down. You may not get back the original amount invested.

Inheritance tax planning and trusts are not regulated by the Financial Conduct Authority.

Level Term

This type of cover protects you for a given term for a fixed benefit. The amount of life cover chosen at the outset will be paid whether a claim on death is made in the first year of the term or the last year. Quite often a payment would be made on the diagnosis of a terminal illness before the last 18 months of the plan, where you had 12 months or less to live. This type of protection may be suitable for family protection and Interest Only Mortgage debt, where the level of debt on the mortgage does not decrease as the years progress, however, this would depend on individual circumstances and you should seek further advice.

  • Provides a lump sum on death or terminal illness to help provide a financial buffer for your family or to pay off debts.
  • The level of cover remains the same throughout the term of the policy.
  • The policy pays out if you die during the term of the policy – or if, before the last 18 months of the term, you are diagnosed with a terminal illness. (A terminal illness means you are not expected to live for more than 12 months).
  • Life insurance policies will only pay out once within the agreed time, so if the policy pays out because of a terminal illness claim, the policy and cover will end.
  • Paying out on diagnosis of terminal illness may be proportionate to the level of cover under a death claim.

Decreasing Term

The least expensive of the Term Assurances, Decreasing Term Assurance does what it says on the label. The level of benefit decreases as the term of the policy runs; the premiums do not however reduce. The premiums are fixed throughout the policy term, and the premium level is lower than that of Level Term Assurance as a result of the decreasing benefit. This type of life assurance is commonly used to protect Capital & Repayment mortgage debt. Typically the policy reduces the protection assuming a Mortgage Interest Rate of 10%. Many are paying mortgage interest at around 5% and, providing interest rates do not go over 10%, the benefit should reduce slower than the mortgage debt, ensuring repayment of the mortgage debt in full. However, there is no guarantee that the level of cover will match the outstanding debt upon a claim.

  • Provides a lump sum on death or terminal illness which can be used to cover outstanding repayments on a mortgage or loan.
  • The level of cover reduces each year – in line with the sum you owe.
  • If you die within the term of the policy, it will pay out a lump sum, to help clear whatever is outstanding on your debt at that point.
  • This plan has no cash-in value at any time.

Income Protection

It’s when you need to make a claim that you realise just how wise investing in health and medical insurance can be.

If you’re unable to work because of illness or injury, under an employers group sickness scheme (Group IPI) salary is continued but is subject to tax and NI in the usual way. The maximum amount of income you can replace through insurance is broadly the after-tax earnings you have lost, less an adjustment for state benefits you can claim. As with all insurance, it is important that you have the right type of policy which provides all that you need it to do for you.

Long-term income repayment policies usually come into play between the time when your employer stops paying sick pay, and when you collect your pension.

Shorter-term policies tend to be used to protect a mortgage, bank loan or other payment. These usually commence within a few weeks but stop entirely after 12 months or 24 months. Short-term policies often include unemployment and redundancy, unlike longer-term income protection cover which does not .

To clarify, Income Protection Insurance only applies to products which pay you an income if you become unable to work due to sickness or injury. Policies to protect mortgages, loans or credit card debts are often called Accident Sickness Unemployment (ASU) policies.

We will happily explain this in more detail to you.

Keyperson Insurance

Directors and employees with highly specialist skills or knowledge are key employees of the companies they work for. To lose one as a result of a critical illness or death can be damaging to the business. That is why taking out a keyperson insurance to protect the company is a wise move.

Keyperson insurances can provide several benefits. These can include:

  • Paying the costs of a temporary replacement
  • Meeting the costs of recruiting a permanent replacement
  • Covering the cost of death or incapacity of a key member of staff.

The full scope of cover will depend on the type of policy purchased but companies ignore the risks of losing key staff at their peril. Shareholders, bank managers, suppliers and customers may not be so laid back.

Share Protection through Life Assurance

Directors’ or partners’ share agreements may provide for the remaining directors to purchase the shares of other shareholding directors should they die. However there is a risk that the remaining directors may not have sufficient funds to hand when a fellow director passes away unexpectedly.

One way round this is to take out life cover as a source of funding.

To arrange such cover requires the understanding and agreement of all concerned. It will also require some careful figure work to determine how much cover is required. However, it will be a comfort to all directors or partners of a business to know that their own or a colleague’s death will leave the other directors with sufficient support to carry out the terms of their shareholders’ agreement.

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