Financial products are sometimes at their most useful when they are protecting our families, our incomes or our business. Whilst insuring ourselves against an undesirable event such as sickness or even death may not be a pleasant thing to think about, the benefit of being able to set financial issues aside at emotionally difficult times cannot be overlooked.
There are many different ways to protect your family (or your business) and your standard of living when you need it most.
• Term Assurance – pays a lump sum in the event of death during the term of the policy. Term assurance is a very cost-effective method of protection. Cover can be level or decreasing over the term of the policy.
• 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 up until the end of the term of the policy.
• Critical Illness Insurance – allows for a lump sum to be paid in the event of diagnosis of certain critical illnesses, such as Heart Attack, Stoke, Cancer and so on. Critical illness is usually available as an addition to all term assurance plans but can be bought on a stand-alone basis.
• Income Protection Insurance – is designed to pay 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 the benefit and term selected and most policies cease to pay the benefit once the insured is able to return to work.
• Keyperson/Shareholder protection – businesses may want to protect their key employees within the 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 to 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.