Protection & Insurance
A practical way to protect your income and family, when you need it most.
Do I need to protect my finances?
Many people occupy a tricky middle-ground between not wanting to dwell on – or even think about – those worst-case scenarios, and not being able to get them out of their heads for any good length of time. In other words, they spend a lot of their time thinking about the things they absolutely, categorically don’t want to think about.
But these anxieties don’t always have a clear, defined form, so how do we know what we need to be protecting ourselves against – let alone how?
Why? Because financial protection is a matter that goes far beyond the scope of your bank accounts or investment portfolio. Our finances don’t exist in a vacuum, and that’s why protection is a matter than crosses into other aspects of your life – from ensuring that your income is insured against unforeseen circumstances, to taking the time to prepare against the risk of severe illness.
In essence, protected finances are those that are part of a much wider network of preparation, forethought, and long-term thinking – matters that go far beyond the immediate security of your bank account. To a certain extent, financial protection ties-in with other essential factors like estate planning, but there are plenty of considerations to work through besides those that are relevant to the very distant future.
There is no single definition for protected finances, since that type, scope, and level of protection required by any one of our clients will differ significantly from the next. There are, however, plenty of key features we look for in a client’s financial status.
Critical Illness Cover
What is it?
A Critical Illness plan is designed to pay out a lump sum on the diagnosis of specified critical illness. It is often ‘bolted on’ to a life assurance policy as an additional benefit but can also be a standalone plan.
Who is it for?
This type of plan is designed for individuals or families requiring a lump sum if they are diagnosed with a critical illness. As an example of where this lump sum could be used is to repay a loan, mortgage, or perhaps pay for time off work. The lump sum could even be used to pay for any necessary alterations to your home or private medical care.
The quality of cover and the illnesses covered can vary significantly between different providers which is why it’s important to ensure you seek professional advice. Our Advisers will ensure you have the most comprehensive policy suited to your individual needs at the most competitive premium.
Income Protection
What is it?
An Income Protection plan is designed to pay out a regular income in the event of you being unable to work due to an accident or illness. These types of plans continue to pay out an income as long as you are unable to return to work up until the end date of the policy (typically your normal retirement age).
This type of plan is quite often seen as the foundation of any financial planning as it is likely that other plans will have to be given up if you do not have sufficient income coming into the household.
Who is it for?
This type of plan is designed for anyone who is working (employed or self employed). It’s worth pointing out that even if your employer provides sick pay, it is unlikely to last for longer than twelve months and so ongoing protection is essential. Plans can be adapted to fit in with any existing protection you might have.
Life Assurance
What is it?
A Term life insurance plan is the most basic form of life insurance and is usually the cheapest way to insure your life. It covers you for a fixed period and pays out a one off lump sum if you die during the policy term. These policies also allow you to include additional benefits, such as critical illness cover.
With some term insurance policies you can add additional options, for instance critical illness cover. If you do add on critical illness cover, the plan will pay out once on diagnosis of a qualifying critical illness or if you die during the term of the policy.
Who is it for?
This type of plan is designed for those who want to leave a lump sum in the event of their death within a specified time period whilst keeping the cost to a minimum. Term assurance can protect your family from the financial implications of a personal tragedy and is particularly important if you have young children or dependents. It is also used to cover a mortgage or other financial commitments.
Mortgage Payment Protection
What is it?
A Mortgage Payment Protection plan is designed to ensure that you are able to continue to make your mortgage (and other related expenditure) payments in the event of accident, sickness or unemployment. It is often referred to as Accident, Sickness and Unemployment cover or ASU. This Payment Protection Insurance is optional. There are other providers of Payment Protection Insurance and other products designed to protect you against loss of income. These plans usually pay benefits for up to two years however, if you are seeking a plan that pays for a longer period, then Income Protection Insurance is generally more suitable.
It’s worth noting that there is currently no legal requirement to have such cover and potential mis-selling of these products has generated much interest from the media and the industry regulator in recent years. However, this doesn’t mean that they are not right for some people and can provide valuable protection in the right circumstances.
Who is it for?
This type of plan is designed for those who are worried about being able to continue their mortgage payments in the event of losing income due to accident, sickness or unemployment.
It is extremely important that you take independent financial advice before taking out this type of plan as they are not always the most advisable, nor cheapest option.
As a guide it would cost £4.80 per month per £100 covered in the event of unemployment. Please contact us for an exact quote taking into account your occupation and for the amount that is required to be covered. We will also discuss with you whether there are more suitable alternatives given your specific situation.
Whole of Life Protection
What is it?
As the name implies, this type of life assurance pays out when you die, whenever that may be. It is usually, but not always, a more expensive option than term assurance simply because the life assurance company knows that it will definitely pay out at some point.
Many of these plans offer some form of investment content and so can be more flexible than term assurance and can acquire cash in values.
Who is it for?
This type of plan is designed for those who want to leave a lump sum in the event of their death, whenever it may occur.
It can be used to pay off debts that will not be repaid during your lifetime.
For those who want to leave a lump sum to pay a potential inheritance tax liability.
Glossary of Terms
Accidental Death Benefit
A benefit from a life insurance policy that is paid when an insured’s death is the direct result of an accident and has occurred within a certain period of time following the accident.
Age at Issue
The insured’s age at the time coverage takes effect. Life insurance plans typically define issue age as either the age at the insured’s last birthday or nearest birthday.
Agent
An authorised representative of a life insurance company who solicits and services insurance contracts. Also known as an Associate.
Annuitant
The individual whose lifetime is used to calculate the pay period of a life annuity.
Annuity
A contract issued by a life insurance company where guaranteed or variable periodic payments begin at a specified time.
Beneficiary
The individuals or entities designated to receive the death benefits from a life insurance policy or annuity contract.
Broker
An insurance sales representative who, on behalf of his or her clients, solicits life insurance quotes and generally sells various kinds of insurance for several companies.
Broker-Dealer
A business entity licensed and registered with the Securities and Exchange Commission (SEC) and the National Association of Securities Dealers (NASD). A broker-dealer has the legal right to offer securities products to the public. An agent selling variable life insurance, variable annuity products and other securities, such as mutual funds, must be registered with a broker-dealer.
Cash Surrender Value
The amount available to a policy owner when a life insurance policy is terminated for a reason other than the insured’s death.
Contestable Clause (or Incontestable Clause)
A provision in a life insurance policy that states the time (called the contestable period) during which a policy may be contested or voided by the insurer based on misrepresentations contained in the application or medical examination. By law, the maximum contestable period is two years.
Contract (Policy)
The basic written agreement between the insurer and the policy owner or contract owner (sometimes referred to as “contract holder”).
Conversion
A policy provision that states that the policy may be exchanged for another life insurance policy under certain circumstances, typically without further underwriting requirements. For instance, term life insurance can be converted to whole life or, in some cases, another form of permanent life insurance.
Date of Issue
The effective date of the policy or contract as issued by the insurer.
Death Benefit
The amount paid to the beneficiary upon the death of the insured regardless of cause.
Deferred Annuity
An annuity in which periodic benefit payments do not begin until after a specified number of years or the annuitant reaches a specific age.
Evidence of Insurability
Proof of a person’s physical condition, occupation or other factors. This is used by a life insurance company to determine the acceptability of the applicant for life insurance.
Face Amount
The amount stated on the life insurance policy that will be paid in the event of the death of the insured or at the policy’s maturity, whichever occurs first. This does not include additional amounts which may be payable under accidental death or other special provisions or amounts acquired through the application of policy dividends, if any.
Fixed Amount Periodic Payment
Payments made in a specified amount that will completely exhaust a principal sum over a specified time period.
Fixed Annuity
An annuity that guarantees a minimum rate of interest during any accumulation period and provides a guaranteed periodic payment at annuitization.
Flexible Premium Deferred Annuity
An annuity that allows additional payments after the initial funding with annuitization beginning after a specified number of years.
Free-Look Provision
A provision in a life insurance policy or annuity contract that gives the policy owner or contract owner a stated amount of time to review a new policy or contract after issuance and receipt. The policy or contract can be returned and voided within this time frame for a refund of all premiums paid; for life insurance policies, cancellation of coverage is effective from date of issue.
Grace Period
The time period following a monthly anniversary during which a life insurance policy will continue in force when the net cash surrender value is not sufficient to cover the monthly expense charge currently due.
Immediate Annuity
An annuity that begins payments within 12 months of the purchase date. An immediate annuity usually makes a payment at the end of each period of payment. The interval may be monthly, quarterly, semi-annually or annually.
Individual Retirement Annuity (IRA)
An annuity, available as a retirement account, for someone who is employed. IRAs receive favorable tax status under Section 408 of the Internal Revenue Code. IRAs are sometimes referred to as Individual Retirement Accounts.
Insured
The person whose life is covered by a life insurance policy.
Interest Rate (Current)
The current rate of interest credited to the life insurance policy or annuity contract.
Interest Rate (Loan)
The current rate at which interest is charged for a life insurance policy loan.
Irrevocable Beneficiary
A beneficiary designation that cannot be changed without the beneficiary’s consent.
Issue Age
The insured’s age at the time life insurance coverage takes effect. Insurance plans typically define issue age as either the age at the insured’s last birthday or nearest birthday.
Joint Annuity (Joint Life Annuity)
An annuity payable to two or more annuitants until one of the two annuitants dies. The joint annuity may provide for continuation of payment or a reduced payment during the life of the surviving annuitant.
Lapse
The termination of an insurance policy due to nonpayment of premiums or, in the case of variable life and universal life insurance policies, the depletion of cash value below the amount needed to keep the policy in force. Under certain circumstances, coverage might continue under a settlement option.
Life Annuity
An annuity that pays a fixed income during the annuitant’s lifetime. Payments cease at the annuitant’s death, even if the annuity has not yet returned an amount equal to the premiums paid.
Lifetime Income with Period Certain
Income paid for the life of the annuitant, guaranteeing payment for a certain number of years if the annuitant does not survive. In the event the annuitant dies within the certain period, the beneficiary receives benefits for the remainder of the designated period.
Loan
A sum granted by a life insurance company to the owner of a life insurance policy, secured by the policy’s cash surrender value.
Loan (Outstanding)
The total amount of policy loans, including both principal and interest accrued.
Maturity Date
For life insurance policies, the maturity date is the end of the contract term.
Monthly Anniversary
The same day as the policy date for each succeeding month.
Net Cash Surrender Value
The cash surrender value less any outstanding loans and/or surrender charges.
Period-Certain Annuity
An annuity with a predetermined guaranteed number of payments, at equal intervals made over a specified period. The payments are payable whether or not the annuitant dies prior to the end of the stipulated period.
Planned Periodic Payment
The premium designated at the time of application as the planned amount to be paid at specific intervals until the maturity date.
Policy Anniversary
An anniversary of the policy issue date.
(Policy) Contract
The basic written agreement between the insurer and the policy owner or contract owner. The policy or contract, together with the application and all endorsements and attached papers, constitutes the entire contract of insurance. A policy is usually life insurance; a contract is usually an annuity.
Policy Date
The date on which coverage becomes effective, as shown on the policy date page.
Policy Owner/Contract Owner (Owner)
An individual or entity that owns an insurance policy or annuity contract. The policy owner/contract owner may be the insured or the beneficiary. The policy owner pays the premium and is typically the only individual or entity who is permitted to make changes to a policy or contract, such as to change the beneficiary, withdraw cash values, or make loans on the policy. He or she may, or may not, also be the insured on the policy. Such rights may be limited in the event the policy has a collateral assignment.
Premium
Payments to the insurance company to purchase a life insurance policy and to keep it in force.
Rider
A written agreement attached to a life insurance policy or annuity contract that limits or expands the policy’s or contract’s terms or coverage. Riders may increase the premium you pay to the insurance company.
Surrender
The policy owner’s right to terminate policy coverage in exchange for the policy’s cash surrender value or other equivalent nonforfeiture values.
Surrender Charge
As provided in the provisions of a life insurance policy or annuity contract, surrender charges are charges an insurance company may deduct if the owner surrenders a life insurance policy or annuity contract for the cash or accumulation value. Companies may also deduct this charge if the owner borrows money on his or her life insurance policy, if the policy lapses for nonpayment, or if the policy owner elects to decrease the face amount of the policy.
Term Insurance
A plan of insurance that covers the insured for a specified period of time (term) and not for his or her entire life. The policy pays a death benefit only if the insured dies during the term and if the policy has not lapsed for nonpayment of the premiums due.
Universal Life
A flexible-premium, current-assumption, adjustable death benefit policy. Similar to traditional life insurance policies, universal life pays a death benefit and accumulates cash value; however, unlike traditional life insurance policies, a universal life insurance policy allows the policy owner to adjust the death benefit and to vary the amount and/or frequency of premium payments.
Variable Life Insurance
A life insurance policy that provides flexible premiums and death benefits, as well as the opportunity to build cash value in separate investment options. The cash surrender value is not guaranteed, but will fluctuate with the market value of the separate account investment portfolio. The policy owner bears the risk of poor fund performance.
Whole Life Insurance
A life insurance policy that covers the insured for life, with level premiums payable for his or her entire lifetime.
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