Life Insurance

Life Insurance

This is the most common type of protection policy. It pays out a lump sum in the event of death for a fixed term and is frequently arranged to cover the outstanding debt of a mortgage. However it is also often arranged in addition to the outstanding mortgage balance to ensure that the family are suitably protected in the event of death, taking account of a loss of household income and other expenses that may arise in the event of death such as increased childcare requirement.

Life insurance can also be arranged as a way to give loved ones a financial gift in the event of death. The low cost of premiums in certain circumstances can mean that some individuals view premiums as an investment for the benefit of family members after they have gone.

Life insurance is also commonly used as a planning tool for mitigating inheritance tax. This type of planning means that a life insurance policy is set up to cover the inheritance tax liability in the event of death, giving the plan holder peace of mind that all of the tax liability will be paid for by the insurance policy, effectively meaning that an estate can be passed on with no reduction due to a tax charge.