Set your family up for the future

Why it’s so important to plan for life after death If anything, the last 12 months have brought home how precious and fragile life can be.

To date there have been more than 127,000 Covid-related deaths in the UK – and that’s before you even think about all the other reasons that are written on death certificates each year.

When death occurs, you will often find the family members left behind facing money worries. On top of the pain and sadness of losing a loved one, there is also a financial shock to deal with, whether it’s the loss of an income or the discovery of some surprising debts.

Some people believe they will be adequately insured if their mortgage is covered in the event of their death – but many of us don’t even go that far.

As a certified financial planner, a vital part of what I do is ensuring catastrophes like premature death are considered so there is a plan in place before an eventuality may occur. Managing risk is an important part of that.

One way of transferring the risk away from your family unit to an insurance company is by buying life assurance.

It doesn’t always have the best reputation, but ask a widow or widower who benefited from it and they’ll tell you a different story.

We insure our cars and our homes, so it should be a natural step to insure our lives.

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If you have financial dependents, do them a favour and get insured

What should I insure?

Think about all your liabilities. An obvious one to start with is your mortgage, but also consider other debts you have which are currently outstanding – overdrafts, credit cards, loans, car finance and so on. Having the funds available to repay these debts, plus funeral expenses, will be a huge comfort to those you leave behind.

What cover do I need?

Term assurance, which pays out if death occurs within a specified term, is the cheapest way to get protection.

A mortgage protection plan could be used to cover your mortgage, and a separate term assurance plan could be used to cover your other liabilities.

After that, to cover a loss of income, I like Family Income Benefit plans.

These are term assurance policies that pay out a tax-free monthly amount for the policy term, rather than a lump sum. To work out how much you need, deduct the payments on the mortgage and other debts you have, and calculate how much more you need for day-to-day living.

Together or separately?

For couples, arranging individual policies rather than a joint policy is slightly more expensive, but you can personalise the cover to suit your needs.

You can also ensure that the benefits are paid into a trust, which will speed up payment, meaning the funds can be available before probate is granted.

If you have financial dependents, do them a favour and get yourself insured. ■ For more financial planning information, search for The Money Planner podcast online.