A Matter Of Life And Death
There is one topic that no one likes to think about - death. And yet, it is something that we must prepare ourselves for in order to take care of our loved ones and ensure family protection.
Making plans for the end of life is a vital task and one that, if not dealt with by each of us, falls to our families and next of kin to arrange.
There are two main tasks that everyone with dependents must undertake in order to protect their loved ones, arranging life insurance and writing a will. This article is a quick guide to help you explore the options available to you.
Why do I need life insurance?
Life insurance is a policy that is taken out to pay off any major expenses such as mortgages, outstanding debts or university fees for children if you die unexpectedly. There are two main types of policy, term insurance and whole life cover.
Term insurance is the more basic of the two types of cover and insures a person for a certain period of time and up to a certain value.
This type of cover will only pay out if you die within the specified period of the policy, and if you live longer, the premiums that you have paid into the scheme are non refundable.
You can take out decreasing term cover, meaning that over the years, the contributions you pay into the scheme lessen.
This makes sense as you pay off your mortgage month by month, the lump sum your loved ones would need if you unexpectedly died would be smaller. It also means that the policy will become more affordable over time.
Whole Life Policies
Unlike term insurance, whole life policies are not limited by time, they only expire when you do. As with the other types of policy, they pay out when you die, but you do not have to guess when that might be.
Generally, these policies cost more, but they offer the you more flexibility and don’t leave loved ones in serious financial hardship if you die following the policy’s expiry.
Why should I make a will?
With the advent of the internet, making or changing a will has become quicker and easier than ever before. If you have ever asked ‘How do I make a will?’, it is now easier and more straight forward to do than it has ever been.
A will is a simple legal document that states what should happen to your money and property after your death. If you die without one, your estate will be legally termed intestate.
This means that a loved one will have to apply for probate - the right to be the executor of the estate and decide what happens to your wealth.
There are legal guidelines for executors on how wealth must be shared out in this instance, but without your own will, you cannot be sure that your wishes will be carried out.
What could happen if I don't make a will?
Writing a will can also limit the amount on inheritance tax that you are exposed to, meaning that if you die without one, the tax man might be able to take a considerable part of your estate.
Despite the importance of writing a will in order to protect your wealth when you die, a 2014 survey revealed that only 48 percent of adults in the UK have drawn one up. This lack of planning might partly be due to the fact that people generally tend to avoid considering their own mortality. It might also be due to a lack of quality information about the problems dying intestate can cause.