Life Insurance Audit

This form will help you determine what sort of life insurance you may need in order to protect you and your family. It is most suitable for ordinary people who work for a living, and neither have enough savings to live on, nor do they want to end up on State Benefits.

It does not give a quote for cover, for that you need to contact us, but it does indicate some potential shortfalls in your present cover.

With regard to cost, the good news is that most people in reasonable health are surprised at how affordable cover is, so please do ask us to quote.

(2) If you think that have cover through work find out exactly what cover. The question to ask is "if I am told by doctors that I will never work again, what happens, and how much do I get?" Good, if not always cheering, answers are "we pay you for the minimum legal time and then you are on State Benefits", " three months on full pay then the insurance gives you half your income, indexed, to retirement", or "six months pay then you get a sickness pension of, on your salary, £10,000 a year".

(3) Complete this section if you have, or expect to have, children. This is about ensuring that there are funds to ensure that they can be brought up should anything happen to you. This calculator does not take into account the term of any existing cover. It is assumed that the existing cover is for a sufficient term. This is normally the case for young families, but may not be true for second fails or later children. Discuss this with us for a detailed report.

(4) If you have children who live with their other parent you can arrange a Family Income Benefit policy written in trust for them. Premiums can be paid by either you or your ex, whatever the two of you agree when setting up the policy.

(5) Most people have life cover for their mortgage, and some people have Critical Illness insurance. That said it has been possible since the late 1980's to take on mortgages WITHOUT any insurance at all, and many single people did so. After all with no dependants there was no need for insurance. If you are one of these people consider Critical Illness (it benefits you if it pays out), and if you now have (or can foresee) dependants, consider Life Insurance.

(6) Speak to us urgently. Many otherwise sound businesses do not survive the death or incapacity of their owner, a disaster for the family, and largely avoidable, though beyond the scope of this simple calculator. For now simply enter 150% of your normal maximum liability (to bank and suppliers, plus three months cash flow requirements assuming NO income).

(7) Normal practice is to insure for 50% of your gross income, less any existing provision.

(8) Normal practice is to settle on a level of insurance that covers your mortgage/debts plus between 1 and 3 times gross annual income depending on your overall financial position . We simply use twice earnings in this simple guide.

(9) Normal practice, when dealing with young children is to set up a term such that the youngest child will have completed University, (25 years if future children expected). The amount of cover depends on detailed circumstances, but 50% of income is assumed for this calculator, with a minimum of £10000. This level of cover is sufficient to support the surviving parent if they decide to stop work if children are very small, or bring in help (au pair, nanny) if older and the parent wishes to continue working.

(10) Normal practice is to cover on a 5 year term basis. Ideally a renewable increasable contract ( so that it can be altered in accordance with your business growth for the simple reason that maximum liabilities tend to increase as businesses expand).

Income Protection Insurance (aka Permanent Health Insurance)

• This is a type of policy that pays you an income if you are unable to work do to ill health or disability. This is an essential insurance if neither your Employer or State Benefits will suffice.
• The income will normally run to State Retirement Age.
• The nature of the problem is not normally important, just that it prevents you working.
• The premium depends on your age and health, and also the type of job you do and any danger inherent in your hobbies.
• The policy normally only pays out after a delay, normally 3 or 6 months, but you can opt for shorter or longer delays if you wish. The longer the delay, the lower the premium.
• Other options are for the cover to be indexed prior to claim, and/or index linked during any claim.

• This is a type of policy that pays you a lump sum if you are diagnosed with one of a series of named conditions, or a condition reaches a certain point.
• The core conditions include cancer, heart attack, stroke and others
• The general idea is that these conditions are common, serious, possibly fatal, and that freedom from money worries, the option to stop working (even if you could continue), reduce or clear debts etc. is a helpful aid to recovery.
• The premium depends mainly on your age and health.
• Very few employers provide this insurance, (but ask yours anyway), and there are no State Benefits that equate to it. In short, if you want it you will almost certainly have to buy your own.

• This is a type of policy that pays out an income if you die.
• The policy is technically known as a Decreasing Term Policy because the cover goes down as you go along. For example if you have a £10,000 15 year FIB policy and die in week one, it pays out £10,000 every year for the next 25 years (i.e.£250,000 pay out). If you die at the start of year 20, it pays out for just the last few years. This makes it very cost effective and the premiums very affordable.
• There comes a time when your children are old enough for you not to commence any new FIB policies. This is a judgment call - with a youngest child of 10 you would want an FIB policy, if your youngest is a mature self motivated child of 15 and both of you work, maybe not.
• Your employer is unlikely to include FIB in your package, but ask about Widows/Widowers benefits. If your partner would get a good pension then you will not need FIB, (though if you expect to change employers and think that a future one may not offer such benefits, a modest low cost FIB policy might be an idea anyway)

This calculator, and the figures shown by it, are for illustrative purposes only and should not be relied on. For more detailed information based on your own circumstances, please speak to your financial adviser.