We may not know that Benjamin Franklin coined an all too familiar phrase, when he wrote a letter to Jean-Baptiste Le Roy, in 1789, but he was not the first to commit this to paper. Daniel Defoe, and his book The Political History of the Devil, wrote this jarring idiom 65 years earlier in 1726, yet this also proceeded another book, written by Christopher Bullock, ten years previously, in 1716, that penned this oft repeated quote, which is – “Tis impossible to be sure of any thing but Death and Taxes.”
It’s probably true to say, more predominantly than any other period of the 21st century, that 2020 has fractured and split, even shattered and exploded with an entirely unanticipated global pandemic.
And still we reel.
Death and taxes, from the meekest of family homes, to the grandest political forums, are under scrutiny at every level, and we are compelled to balance and weigh these two significant inevitabilities. For most, now is the time to put in place procedures and preparations that keep not just ourselves, but those dearest to us safe.
One of these preparations, is to consider what is commonly and often dismissively referred to as life insurance. This is in fact the reckoning of our passing, and the consideration of how that will affect family, friends, dependants, and our legacy.
As times are illustrating, things can change on the largest of scales without any warning, and the ramifications reverberate through our entire lives. The need now is to focus on how life insurance, or life cover, is understood, and most significantly applied.
There are two primary kinds of insurance that will be of interest, term insurance and whole-of-life-insurance, and both must be explored to see what best meets your needs.
Term insurance is straightforward to understand, and often equates to being the cheapest, based on a period of for example 20 years, whereby if you die within that term period, then your family immediately claim the benefits of that policy. However should you exceed that proposed term duration, the policy is deemed completed, and your family gain nothing.
Premiums for term cover are usually fixed for the entire term period, so payments will never exceed that agreed fee, and sometimes those with mortgages may enter into some such insurance agreement to run concurrently.
The primary types of term insurance include level and decreasing term, which is simply that, with level term, your agreed pay-out remains unchanged at any point the policy is incurred, so if your plan was £200,000 over 20 years, then were you to die within year 2 or year 19, your family or benefactors would receive that same amount.
With decreasing term insurance, the potential pay-out diminishes over time, and is commonly linked to mortgage repayments, so as the amount you owe decreases, so does the amount of insurance cover. A good option popular with those starting a family, so if you have children and your partner or yourself were to die unexpectedly, the pay-out you’d need them to receive, though steadily reducing, will still be of significant benefit while they’re growing up and becoming more self-sufficient. With an interest only mortgage a decreasing term policy would not be recommended since the money you originally owed is only repaid at the end of the mortgage term.
Worth, at this point, to mention Death in service benefits, sometimes offered by employers if you are eligible, meaning your beneficiary will receive a tax-free lump sum should you die while employed by the company in question.
There are family income policies, which pay out a fixed monthly sum or a lump sum, to your loved ones. Commonly known as family income benefits, the concept is to arrange payments that are as close as possible to your salary, so that mortgage payments, bills and running costs are covered comfortably. Depending on how long the term of this policy is, it can be “index linked” to the Retail Prices Index, that takes inflation into account, and these policies feel easier to manage. A bonus is, that while over time the pay-out is less, the premiums for family income benefit policies, are usually cheaper.
Whole-of-life cover is typically the most expensive, since this unconditionally guarantees paying out as long as your premiums are up to date, the payment is certain, so consequently of great benefit to your family, so if affordable this is certainly worth considering.
As many people are in partnerships, or married, there are options regarding single life and joint life policies. Some of the caveats are worth bearing in mind, since, while one set of documents may feel easier to negotiate, with joint life it only pays out upon the death of the partner, and the partner left, wanting to initiate a new life insurance policy, will inevitably find it more expensive since premiums rise with age.
If both of you choose a single life policy then this eventuality is of course covered, and it may be that the sum of the separate policies is not significantly different to the joint premiums.
Two additional extras being added more and more, most particularly this year, is critical illness cover and terminal illness cover, whereby a lump sum is paid out after a serious condition is officially diagnosed, or with a terminal diagnosis, a lump sum is paid out if given less than 12 months to live.
An important point to make regarding co-habiting couples, and this also affects Death in service, is any policy either of you has established, contains what is called Expression of wish. This sets out, with your scheme administrator, who you would like to receive any benefits payable upon death. Often linked to a Letter of wishes that accompanies a will, both are not legally binding, but will be taken into consideration by trustees and executors.
It has to be mentioned, in the not unsurprising wake of many divorces pending this year, that many families are experiencing disruption and conflict, and as parents it’s important for each parent to adapt and set out a policy based on their single state. Equally, where there exists only one parent, a policy must be explored thoroughly that covers payment to children, and payments to whom has the responsibility of raising the children should they be of young age or even special needs, should the worst happen.
So, it is with responsible wisdom that we act and prepare as much as we have the power to do so.
Matters related to finance, and the handling of money can be an imposing force to reckon with at any time, and it may well be the time to seek out options available by those experienced in such matters.
Financial service advisors are much more accessible than ever before, highly experienced in all available commodities and services to help you, and not detached, but willing to bring the personal consultation that’s relevant and affordable, in the times ahead, to help you gain and keep stability, security and hope.