Life Assurance
Some first thoughts on buying life assurance
Why life assurance isn’t the same as life insurance, how trusts can help you make the most of your policy, life assurance and inheritance tax, plus some rules of thumb on what constitutes adequate life assurance cover.
Life assurance isn’t technically the same as life insurance (although the terms are often used interchangeably). Insurance offers you money if you die in a certain period. Assurance is effectively an investment plan that runs until you die (unfortunately something that’s guaranteed), and the gamble on the part of the life company is simply when that’s going to happen.
One thing you should consider particularly when opting for the certainty of life assurance is the concept of booking the policy “under trust”. This will allow the benefits of the policy to be paid directly to your descendants, rather than into your estate. Since your estate will be frozen until probate is granted, this gives your family (or whoever else you choose) much faster access to the funds. Furthermore, the trust is not liable for inheritance tax, and can indeed be used to pay off the inheritance tax bill (this is actually an excellent reason to get a life policy, particularly if you have a property which would otherwise have to be sold).
There’s no formal “right amount” of life assurance cover to get- but a rule of thumb is twenty to twenty five times your current annual expenditure. If that sounds like an awful lot, consider what you think your loved ones are “worth”; or what sort of compensation claim you’d sue for if one of your loved ones died under negligent circumstances. It isn’t that much after all.
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