The real positive with Family protection, according to John Wilkinson, protection director of Aegon UK, is peace of mind and knowing that protection goes beyond mortgage cover to help your client’s family to rebuild their lives without being crippled by debt.
Family income benefit and decreasing term cover will calculate the amount paid from the date of the claim to the end of the term.
This will be paid free of income tax, according to Mr Wilkinson who says in either case it is a good idea to write the policy in trust to mitigate the possibility of inheritance tax liability.
Mr Wilkinson says: “Having a monthly income can be a valuable tool to help manage the household budget, but it is possible to ask for a monthly benefit to be paid out in one lump sum instead of having an income.
“If survival can be perceived as a disadvantage, then it should be remembered that premiums cannot be recovered in the absence of a claim.”
However, if your client never suffers from a critical illness or sickness that prevents them from working, they will not receive any cash back.
Bonnie Burns, product director of Legal & General, says: “The downside of life insurance is that someone has to pay to insure that risk and, in the case of term policies, the insurance may not pay out at all if the life assured survives the term.
“However life cover will generally pay out the full sum assured even if the policy has been running only a matter of months and if the client survives until the end of the term, there is no cash back, but the good news is they have survived until the end of the term and had the peace of mind of having been protected.”
The client must also be aware of any limitation on the policy, particularly if they have chosen to take out more restricted cover, as well as ensure that they provide all the necessary information required when applying.
While 90 per cent of claims are paid out annually, this means there is a worst-case scenario of in 10 per cent of cases of clients having paid out premiums on a policy that ultimately did not cover that which they thought it would.
