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Why Do Financial Advisers Advocate Life Insurance?

There are many reasons why financial advisers advocate for life insurance, one of the main reasons is risk-mitigation in your financial planning. Risk-mitigation essentially means planning to reduce the effects of financial strain or pressures during a time of need. The “risk” in this case is the risk of death or serious illness, which will affect your families financial stability in the future.

As independent chartered financial planners; we believe that by highlighting all of the potential risks that come with financial burdens, such as mortgages and loans, helps you plan more efficiently. It is our duty to help you make the most of your money, and ensure that you are able to sustain your commitments. Helping you plan for the future involves thinking about potential unforeseen circumstances, such a sickness or incapacity to work. This type of forward thinking planning helps you make the right decisions for your financial future.

What is life insurance?

Life insurance is ultimately a contract between the insurer and policyholder. The insurer promises to provide financial settlements to a designated beneficiary in specified events, such as death or serious illness. Policy holders will pay a fixed monthly or yearly amount to ensure their insurance is valid. Additional expenses such as funeral costs may be included in the cover. When looking at life insurance you need to be one hundred percent honest about your health. Providing as much information on hereditary illnesses, as well as any historic ones you have had provides the insurance company with all the information, they need to provide an accurate policy quote.

Is life insurance a legal requirement?

Life insurance is not a legal requirement in the UK. However, when you are undertaking certain loans, such as mortgages. Some lenders may have life insurance as a precondition for allowing you to borrow money to buy your home. For the majority of homeowners, having life insurance makes financial sense as it is there to cover you in case of unforeseen circumstances. Life insurance does also make sense for those who have other commitments, such as young families. The financial protection life insurance policies offer is overall a worthwhile investment.

Why should I have life insurance?

There are many reasons why you should consider having a life insurance policy. As previously mentioned above, unforeseen circumstances can happen to anyone at any time. Having a backup plan in place should you find yourself unable to work due to serious illness or injury, you still have the financial means to support yourself. Another consideration is to offer financial support to your family should you find yourself with a terminal illness, or unexpected death.

While we all believe we will live forever; it is important to consider those who we will leave behind and what financial state they are left with. Making the process easier by removing the worry of financial strain is something that you have power over.

The benefits of life insurance

There are many benefits of life insurance. The main one being a sense of security. Many who have life insurance policies feel reassured that finances won’t be a worry for them should they find themselves in unfortunate health situations. Another benefit to life insurance is the mitigation of stress from potential lack of savings. Or the savings you do have can be used elsewhere, having a policy in place means you are covered. And the savings you have are yours to do with as you wish.

Tax benefits for life insurance

Life insurance you take out yourself does not have any income tax on the policy proceeds in the event of an illness or death claim. They are also usually exempt from capital gains tax when the payouts remain in the hands of the policy owner, please be sure to speak with your financial adviser about the particulars of your insurance policy.

Schofield are independent chartered financial planners who provide financial advice for each stage of your life. No matter what age you are, it is always important to consider all avenues in your financial planning. Life insurance is one of those avenues. Contact our offices today and speak to our advisers.

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