Last week, HMRC confirmed inheritance tax (IHT) receipts April 2022 to December 2022 of £5.3bn meaning a forecasted record IHT take of around £8bn this year and in the years to come. This week we have seen news that nearly £5.5 trillion worth of UK estates will be dealt under intestacy laws this year i.e., death without a will.
Sadly, this week we attended a close friend’s funeral and the above combined with our friend’s funeral has prompted us to publish 3 videos this week offering 10 reasons to have life insurance, wills, and lasting powers of attorney.
Watch: 10 Reasons for Wills 10 Reasons for LPAs
1. Replacing Lost Income
If we gave you a genie’s magic lamp that you could rub each year and it gave you £50,000 pa for life, how much would you insure the lamp for? £0.5m? £1m? Your and/or your partner/spouse is a magic lamp. Could you or your loved ones survive with the loss of income. Life insurance can be used to replace that lost income.
2. Funeral Expenses
Do you have enough savings to pay for yours or a loved one’s funeral should someone die? The average funeral cost today is more than £4,000. Life insurance can be used to cover funeral costs.
An individual’s debts must be paid for from their estate. Debts do not ‘die with you’, they must be paid if you have money and can only be written off if you have no assets. In terms of joint debts such as a mortgage, the debt does not die with you. Your spouse or partner will still be required to pay the mortgage. Life insurance can be used to protect your loved ones to pay off any mortgage and debts to not leave any debts for your loved ones or executors.
If you have children, do you want to leave then destitute if you or your partner dies? Apart from the shock of losing a parent when young, do you really want to leave them in financial hardship or unable to go on that school trip, or have money to go out with friends, go on holiday, pay for university or education fees, buying a car, help with a house purchase deposit, get married etc. Life insurance can be used to protect your loved ones at such a difficult time.
Some people use life insurance as an investment. For example, if want your loved to have a large sum on your death, you or your children may wish to pay insurance premiums and treat them as an investment because on eth day you die, there ‘investment’ in life insurance matures as a lump sum pay out.
6. Savings Plan
Some unit linked whole of life insurance and all life endowment policies are also savings plans. Some of the premiums that you pay are for the ‘death insurance’ part and some of the premiums are invested. This can mean life insurance protection when needed but then a cash lump at maturity or if you decide to stop the policy and cash it in as you no longer need life insurance.
7. It's Cheap
Life insurance premiums are cheap. Some policies can start from as little as £10pm, say 30p per day, others start at just £1 a day. This means you can at least get some minimal life insurance for a packet of crisps or a chocolate bar. If you spend hundreds of £ per month on motor insurance premiums for a piece of metal with wheels that is going down in value every day but little or nothing on insuring your own life, then you need to adjust your priorities to protect your loved ones.
8. Inheritance Tax
Life insurance is an excellent way to plan for any inheritance tax liability. By taking out life insurance and putting it in trust for your loved, they receive a lump sum on your death that is inheritance tax free (if in trust) that is paid out immediately and can be used to pay any inheritance tax bill which will not only speed up probate, but it will also mean there is enough money to cover inheritance taxes rather than loved ones being forced to sell your property or using up other wealth to pay the tax bill.
9. Business Protection
Are you a shareholder/owner in a limited company or a partner in a business. If you or your business partner dies, do you really want to then be in business with their surviving spouse, children or loved ones? Do you want the business to close meaning your loved ones get nothing or even put employees out of work? Directors Share Protection and Partnership Share Protection life insurance are ideal to protect the continuity of the business, allow business partners to buy your share of the business from your beneficiaries and your beneficiaries to receive a cash lump for their inherited share of your business interests.
Make no mistake, accidents do happen. None of us can predict the future. If sonneting were to happen and you pass away prematurely and unexpectedly, your loved ones, your funeral, your debts, your tax bill or your business can be protected from unforeseen events.
The above 10 reasons do not only apply to life insurance but also you should consider them when thinking about sickness and income protection insurance as well as critical illness insurance.
Talk to us about the type of life insurance cover that is best for you, what level of cover you need and what the costs are.