Life assurance

Worried

When you're shopping about for life assurance, Martin says generally it's a case of the cheaper the better, but is there anything I should look out for? I am wanting decreasing term cover for me and my partner. We will own the property as tennants in common. Is it OK to have separate policies (if that's the cheaper option), as we're going to arrange wills anyway?

dunstonh

but is there anything I should look out for?

Are premiums guaranteed or reviewable?
Make sure it is not a yearly renewable term assurance (they quote in the same lists as level/decreasing term assurance)
Where prices are similar, check for extras like guaranteed insurability, free options included (like child cover, war zone, overseas exclusions in case you travel a lot, ability to amend the policy term/sum assured, contract events that could be a of benefit etc).
Also consider their application/admin/underwriting process (particulary if you have to declare medical issues as one company may increase a premium but another may not).
Where CI or waiver of premium is included, check the conditions covered as they vary. Make sure you are comparing like for like and not budget vs comprehensive.

Also check the trust documents the provider issues suit your requirements (trusts being particulary important to unmarried couples).

Is it OK to have separate policies (if that's the cheaper option)

It is ok but it wont be the cheaper option plus you will have to consider potential IHT issues. Although putting the policy in trust would avoid that or writing the case on life of another (proposed and life assured are opposite).

Worried

If we have a jont policy do we need to worry about trust issues? Can you explain a bit about that, as I don't understand? We are unmarried and will own the house 55/45 (deed of trust) and will have wills to leave our bit to the other. What is waiver of premium? I have got a quote from my IFA but reading this site says I can use the online broker's that take a fee instead of comission to lower our premium, but is this something I'm better of not trying to sort out myself? We just want life, decreasinf, guaranteed, not CI, as will take out PHI through our IFA.

dunstonh

If we have a jont policy do we need to worry about trust issues?

It wouldnt be an issue on joint life (unless you have children and have an IHT liability you wish to avoid).

Can you explain a bit about that, as I don't understand?

If you are unmarried, you dont benefit from the ability to transfer assets between you without incurring CGT/IHT. The house may have a split but the value of the [almost] half that the other owns could be above the IHT threshold and give rise to an inheritance tax liaiblity. It wouldnt matter what the will says, the tax man would have to be paid first and if you dont have the money to pay it, the property would have to be sold (or you borrow). Obviously, it depends on the values involved and your overall estate. If the values are small, then there would be no issues at this time. Although it may become an issue in future. If the values are higher, then it could be an issue from day 1.

What is waiver of premium?

The life company will take over the premiums if you are unable to work due to accident/sickness.

I have got a quote from my IFA but reading this site says I can use the online broker's that take a fee instead of comission to lower our premium, but is this something I'm better of not trying to sort out myself?

If you know what you are doing then its fine. Obviously, going execution only and getting it wrong means that you could lose more than you gain plus you wont be able to complain to the FOS because you transacted on execution only basis. (that is why you get discounts, as there is no liability and reduced costs. Liability is one of the biggest costs advisers have).

Worried

Thanks for this, it's really helpful. I still not fully understanding the point about IHT. We don't have children at the moment, but hope to and plan to remain unmarried. With a joint policy and us leaving the other our share of the house, could we be liable for IHT?

dunstonh

If you plan to remain unmarried, then when the children come along, be worried about it then and deal with it then. You will need life cover to be in trust at that point but it would only apply to family protection and not the house (in most cases).

With a joint policy and us leaving the other our share of the house, could we be liable for IHT?

Only if on first death there are net assets in excess of £300k. (net means you deduct the mortgage off first).

Worried

dunstonh wrote: »

If you plan to remain unmarried, then when the children come along, be worried about it then and deal with it then. You will need life cover to be in trust at that point but it would only apply to family protection and not the house (in most cases).

So, could you arrange for an exsisting policy to be in trust later on?


Only if on first death there are net assets in excess of £300k. (net means you deduct the mortgage off first)

No worries there then!

Thanks for your help!