Life Cover Insurance, Do You Need It

If you’ve been considering taking out life cover, you probably have several important questions and concerns to address. Particularly if the policy you’re interested in attaches a heavy premium, it’s important to know what you’re getting out of the deal.

Independent financial advice comes highly recommended for anyone looking to secure their financial future. In the meantime, you may find the following insights regarding life cover and its potential benefits useful.

Why take life cover?

In simple terms, life cover is a long-term insurance policy that protects your family members and dependents from financial hardship, if the worst should happen. If you die (or you’re declared terminally ill with some policies), a death benefit is paid to the specified beneficiary or beneficiaries, in accordance with the agreed terms of the policy.

The Benefits of Life Cover

The most immediate benefit of life cover is the way in which it provides an immediate cash injection to help the beneficiaries cope with the financial consequences of the policyholder’s death. However, there are additional benefits to life cover – one of which being favourable tax treatment, when compared to most other financial instruments. Life cover therefore provides both the policyholder and their beneficiaries with priceless peace of mind.

Types of Life Cover

There is a lot of information out there today, especially on social media, where everybody is advertising all types of cover, but you need to get the full inside information from experts first.
There are various different types of life cover, which vary significantly from one country to the next. However, the most common types of life cover available are as follows: 

Whole-of-life cover – a policy for the entire life of the policyholder, paying out irrespective of when they die. 

Term insurance – valid for a predetermined period, paying out only if the policyholder dies within a specific time frame 

Decreasing-term insurance - a policy where the potential payout decreases on an annual basis

Increasing-term insurance – a policy where the potential payout increases every year, often to reflect inflation

Renewable term insurance – valid for a predetermined period of time, with the option of extending coverage before the current term comes to an end 

Joint life insurance – a single policy that covers a couple, paying out in the event that either policyholder dies

Securing life savings/taxable assets using a trust If deemed appropriate, it may be beneficial to secure your savings and/or taxable assets using a trust. The biggest benefit of using a trust is the way in which your taxable assets and savings remain protected from legal claims.

Conventionally, all assets that you have (perhaps with the exception of retirement savings) may be subject to seizure by creditors and courts. By contrast, all assets held in a trust are afforded greater legal protection. This in turn means that the assets you pass on to your beneficiaries cannot be seized to repay any debts you leave behind at the time of your death.

Securing your wealth using precious metals (Silver, Gold, Platinum) Alternative investments such as precious metals are often incorporated in a diversified investment portfolio. Many experts believe that converting some of your wealth into precious metals represents a beneficial and potentially lucrative long-term investment option.

When you purchase physical precious metals, it is not necessary to have them tied directly to your name. As a result, the precious metals you buy cannot be taken from you at any time under any circumstances, except by way of physical force. Precious metals can be stored safely and indefinitely in secured storage facilities and passed on to beneficiaries.

Best spread of risk for life savings and assets

As a general rule of thumb, investors are advised to slowly but continuously decrease their risk exposure over time. This is to ensure that retirement is reached with a good amount of money preserved in safe investments.

The importance of diversification through asset allocation is not to be overlooked, but nor is the careful and rational assessment of your own risk appetite. Asset allocation can protect your portfolio from the risks of investing exclusively in a single stock or class of securities.

The four main classes of assets are as follows: ​

Stocks or equities, 

Bonds or fixed-income instruments, 

Money market or cash equivalents, 

Real estate or other tangible assets,

Your ideal spread of risk for life savings and assets will be unique to you and you alone. Hence, it is essential to obtain independent financial advice, before determining where and how to allocate your assets.

Keeping the tax man’s fingers out of your estate.

The key to successful tax liability minimisation lies in carefully and completely considering all available options. Again, the options available to you personally will be determined by your personal preferences, your financial circumstances and your preferred asset allocation strategy.

There are various options available for the effective and legitimate reduction of tax liability, both for yourself and for your beneficiaries. Book a consultation with an independent financial adviser to broaden your understanding of your position and the options available to you.