Life Insurance and Protection Advice

What Can Life Insurance Protect?

The financial effect of a death will differ between households. Some families depend heavily on both incomes, while others may need cover for unpaid work such as childcare and household responsibilities.

Life insurance may be considered for:

• Repaying a residential mortgage
• Clearing loans and other financial commitments
• Replacing income relied upon by a partner or family
• Meeting childcare, education and household costs
• Providing support for a financially dependent relative
• Covering funeral and estate-related expenditure
• Protecting a business or providing cover for key individuals
• Helping to meet a potential Inheritance Tax liability where appropriate

Life insurance is not required in every circumstance. A person with no dependants, debts or other financial responsibilities may have a more limited need for cover. Existing savings, workplace benefits and policies should also be considered before new cover is arranged.

Types of Life Insurance

Different forms of life insurance are designed for different financial needs. The appropriate structure depends on the purpose, amount and intended duration of the cover.

Level Term Assurance

Level term assurance provides a fixed amount of cover for an agreed period. If a valid claim is made during that period, the policy pays the stated benefit.

It may be used where the amount requiring protection is expected to remain broadly consistent, such as providing a set legacy or replacing part of a household income.

Decreasing Term Assurance

Decreasing term assurance provides cover that reduces during the policy term. It is commonly used alongside a capital repayment mortgage because the outstanding mortgage balance should also reduce over time.

The rate at which the cover reduces may not exactly match the mortgage balance, particularly if the mortgage interest rate or repayment arrangements change.

Family Income Benefit

Family income benefit is designed to provide a regular income following a valid claim for the remainder of the policy term, rather than paying only a single lump sum.

This may help replace an income relied upon by the household, although the total amount eventually paid depends on when during the policy term the claim occurs.

Whole-of-Life Insurance

Whole-of-life insurance is intended to remain in force throughout the insured person’s life, provided the required premiums continue to be paid and the policy conditions are met.

It can be used for estate-planning purposes or to provide a payment whenever death occurs. Premiums are generally higher than for term assurance because the policy does not have the same fixed end date.

Some whole-of-life policies have reviewable premiums or investment elements, so the terms, future affordability and potential for changes to cover should be understood carefully.

How Much Life Insurance Might You Need?

Using a simple multiple of salary will not always produce an appropriate level of cover. The calculation should reflect the actual financial consequences for those who would be affected.

We consider:

• The outstanding mortgage and other debts
• Household income and regular expenditure
• The number and ages of dependants
• Childcare and education costs
• The period for which financial support may be required
• Funeral and other immediate expenses
• Existing savings and investments
• Workplace death-in-service benefits
• Existing life insurance policies
• The amount that can be covered affordably

The aim is to arrange a proportionate level of protection. Insufficient cover may leave a shortfall, while unnecessary cover can create premiums that are difficult to maintain.

How Long Should Life Insurance Last?

The policy term should relate to the period during which the financial need exists. Cover intended to protect a repayment mortgage may reflect the remaining mortgage term, while family protection may need to continue until children are expected to become financially independent.

Other considerations can include anticipated retirement, the duration of financial support for a partner and the period during which business responsibilities will continue.

Term insurance does not normally pay anything if the insured person survives beyond the end of the policy. It is therefore important to select the term deliberately rather than assuming that cover can be extended later on the same terms.

Single and Joint Life Insurance

A single life insurance policy covers one person. Two partners can therefore hold separate policies with different amounts, terms and beneficiaries.

A joint-life policy covers two people under one arrangement but commonly pays only once, following the first qualifying death. The policy then ends, leaving the surviving person without that cover.

A joint policy may cost less than two comparable single policies, but price should not be the only consideration. Separate policies may provide greater flexibility and the potential for two separate payments.

Medical Underwriting and Policy Terms

When you apply for life insurance, the insurer will assess the risk involved. This process is known as underwriting.

The insurer may ask about:

• Age, height and weight
• Current and previous medical conditions
• Family medical history
• Smoking and alcohol consumption
• Occupation
• Travel, residency and hazardous activities
• The purpose and amount of cover requested

Depending on the assessment, the insurer may offer standard terms, charge a higher premium, apply an exclusion, postpone its decision or decline the application.

Questions must be answered accurately and completely. Incorrect or incomplete information can affect a future claim.

What Affects the Cost of Life Insurance?

The premium will depend on the risk assessed by the insurer and the type of cover selected. Relevant factors can include:

• Age
• Health and medical history
• Smoking status
• Occupation and lifestyle
• The amount of cover
• The policy term
• Whether the cover is level, decreasing or whole of life
• Whether additional benefits are included

Some policies have guaranteed premiums, while others allow premiums or benefits to be reviewed. The terms should be checked carefully so that you understand whether the cost could change.

Affordability over the intended policy term is important. Cover may end if required premiums are not maintained.

Placing Life Insurance in Trust

Some life insurance policies can be placed in trust. A trust can determine who should benefit from the policy and may allow proceeds to be paid without waiting for the administration of the estate, depending on the circumstances.

A trust may also affect whether policy proceeds form part of the estate for Inheritance Tax purposes. However, trusts have legal and tax consequences, and the correct structure depends on the policyholder’s objectives and family circumstances.

Trust arrangements should be reviewed carefully, particularly after marriage, divorce, bereavement or another significant family change. Independent legal and tax advice may be required.

Life Insurance, Critical Illness Cover and Income Protection

Life insurance, critical illness cover and income protection address different financial risks.

Life Insurance

Life insurance pays following a valid claim for death during the period covered by the policy. It is primarily intended to protect the people or commitments left behind.

Critical Illness Cover

Critical illness insurance normally pays a lump sum when the insured person is diagnosed with a specified condition that meets the policy definition. It does not cover every illness or every level of severity.

Income Protection

Income protection is designed to replace part of the insured person’s income if illness or injury prevents them from working, subject to the policy definition, deferred period and benefit terms.

One form of protection does not automatically replace another. Further information is available on our critical illness and income protection page.

Life Insurance and Your Mortgage

Life insurance is not generally a legal requirement when taking a mortgage, although a lender may require appropriate buildings insurance. However, life cover may be important where another person would be unable to maintain repayments or remain in the property following a death.

The type and amount of cover should reflect the mortgage structure and wider household needs. Mortgage protection alone may not provide sufficient support for income replacement, childcare or other family costs.

Our mortgage advisers can consider relevant protection needs alongside the borrowing recommendation.

Reviewing Existing Life Insurance

Life insurance should be reviewed when financial responsibilities or family circumstances change. Relevant events may include:

• Buying a home or changing a mortgage
• Marriage, separation or divorce
• The birth or adoption of a child
• A significant change in household income
• Starting or selling a business
• Taking on additional borrowing
• Changes to workplace benefits
• Changes to intended beneficiaries

A review does not automatically mean that an existing policy should be replaced. Older policies may contain favourable terms, and changes in age or health can make replacement cover more expensive or unavailable.

An existing policy should not normally be cancelled until any replacement policy has been accepted, started and checked.

Our Protection Advice Process

Understanding What Needs Protection

We begin by discussing your family, income, mortgage, other liabilities and the financial consequences of death, illness or an inability to work.

Reviewing Existing Provision

We consider existing personal policies, savings and workplace benefits to establish what protection is already available and where potential gaps may remain.

Establishing Priorities and Affordability

Where the full amount of potential cover would be unaffordable, we help establish which risks and financial commitments require the greatest priority.

Research and Recommendation

We research appropriate policies from the insurers available to us and explain the recommended cover, policy term, premium basis, exclusions and relevant alternatives.

Application and Underwriting

If you decide to proceed, we assist with the application and explain any additional information requested by the insurer. Cover does not begin until the insurer confirms acceptance and the policy starts.

Protection Advice from Sturdy Edwards

Sturdy Edwards Financial Services provides established financial and protection advice from its office in East Grinstead. Our recommendations are based on the client’s financial needs rather than selecting cover solely by price.

Our approach includes:

• A detailed assessment of your responsibilities and existing provision
• Recommendations tailored to your circumstances and budget
• Research across a range of insurers and policies available to us
• Clear explanations of policy terms, premiums and exclusions
• Support through the application and underwriting process
• Reviews where circumstances or protection needs change

You can also meet our financial adviser team or explore our wider financial advice services.

Sturdy Edwards (Financial Services) Limited is authorised and regulated by the Financial Conduct Authority. Our FCA reference number is 190659.

View Sturdy Edwards on the Financial Services Register .

Frequently Asked Questions

How Much Life Insurance Do I Need?

The appropriate amount depends on the purpose of the cover. We consider mortgages, debts, household income, dependants, future expenditure and any existing workplace or personal protection.

Does Life Insurance Always Pay Out?

Claims are assessed against the policy terms. A claim may not be paid where the relevant event is not covered, an exclusion applies or important information was not disclosed accurately during the application.

Do I Need Life Insurance for a Mortgage?

Life insurance is not generally a legal requirement for a mortgage. However, it may be appropriate if another person would be unable to maintain repayments or remain in the property following your death.

Can I Hold More Than One Life Insurance Policy?

Yes. A person can hold several policies for different purposes, subject to insurer underwriting and justification for the total amount of cover requested.

Can Life Insurance Be Placed in Trust?

Some policies can be placed in trust. This may help control who receives the proceeds and can allow payment outside the estate, depending on the circumstances and trust used. Legal and tax advice may be required.

Should I Cancel an Existing Policy Before Applying for Another?

No existing policy should normally be cancelled until replacement cover has been accepted, started and checked. Changes in age or health can affect the cost and availability of new cover.

Arrange a Protection Review

If you would like to review existing life insurance or understand what protection may be appropriate for your family and financial commitments, our advisers are available to help.

Please contact Sturdy Edwards Financial Services to arrange an initial protection discussion.