The death of a loved one can mean extreme upset and turmoil to family life. Should this unfortunate event happen, life assurance can remove any immediate financial worries for your family.
Life assurance is designed to provide for your financial dependents in the event of your death. There are many reasons that life assurance may be needed but here are the top four.
Support your family
Your children are likely to be financially dependent on you for nearly as long as a mortgage term so it is important this is factored into your protection planning. Reliance on one income or the cost of high childcare fees means that protection against the loss of income is essential.
To discharge a debt
When someone dies, their assets pass onto their estate along with their liabilities. The debts will need to be paid from the assets, often significantly reducing what loved ones receive.
If the deceased died with a mortgage on their home, whoever winds up with the house is responsible for the debt. If the house was owned jointly, the survivor is still on the hook for the mortgage. If the debt isn’t paid, the bank will sell the house to satisfy the mortgage.
To pay inheritance tax
When you die, the government assesses how much your estate is worth. It then deducts your debts from this to give the value of your estate. Of what is left, a 40% tax is payable on anything over £335,000. Dealing with this can save your relatives £100,000s.
To create a family emergency fund
Although people do not like to think about it, there is a possibility that situations could occur where you would need to depend on an emergency fund for short-term survival. Any one of the following could happen unexpectedly: a hospitalisation, an accident, an illness, job loss, a death in the family, and more.