Approx. 8 mins read time

Financial Protection for Families and Businesses – What Can You Do?

The options of how you can provide financial protection for your family and business.

The current COVID-19 pandemic has drastically unsettled the normal routine of people’s everyday lives.  Everything, including fear of their own health, their family’s health, worries about their jobs and reduced social lives are different to what they were just a few months ago.

One of the areas that our clients are becoming more aware of during the pandemic is their own mortality and the potential consequences for their families and businesses should the worst happen.  For those proactive in trying to provide financial protection for those left behind, there are a number of options available.

Whilst it is not necessarily ‘business as usual’ for the UK’s biggest insurers, they are still open and taking applications for new cases.  The below briefly covers the options available to clients:

Personal Life Cover

  • Term Assurance – for those with a mortgage or other large debts, term assurance is a simple way to provide a lump sum to repay those debts and possibly an additional lump sum.
  • Family Income Benefit (FIB) – a FIB policy ensures that a surviving spouse can receive a tax-free income for a set period in the event of death. This may cover a period until young children turn 21 for example and remove any worry about longer-term income needs.
  • Income Protection – an income protection policy can help replace lost income if an individual is off sick and has no long-term sick pay from the employer. It can also help self-employed individuals who would otherwise be unable to work and thus their income would cease.

Business Protection

  • Relevant Life Policy – a tax efficient way for business owners to provide a tax-free lump sum to their families in the event of their death.
  • Shareholder Protection – this enables the shareholding directors or business partners to purchase the shares from the deceased shareholder’s estate.
  • Loan Protection – will help clear any outstanding business overdraft, mortgage or loans, should lenders call in the debts guaranteed against a Director who has been lost to the business
  • Key Person Protection – protects against financial loss of key personnel within the business. It provides a cash injection should a key worker responsible for significant revenue generation be lost.

The Protection Market in the wake of Covid-19

The protection market has changed because of the impact Covid-19, with the ability to undertake full medical underwriting unsurprisingly the area most affected.

Following the increased strain COVID-19 has placed on the National Health Service, Life Insurance companies have provided an update on the medical underwriting section of their policies.

The main points to draw out of the responses are:

  • A number of providers have added new questions to their application forms relating to COVID-19
  • All medical screenings have been postponed until further notice
  • GPs are not completing report requests as their focus is naturally required elsewhere
  • Applications for cover falling within non-medical underwriting limits will be dealt with as normal so provided an individual has no medical issues, securing some form of cover should be possible as an interim measure. Some companies have increased the limits for non-medical underwriting.

So, if an individual is fit and healthy they can still get cover. If an individual has any health or lifestyle factors that might need further investigation, this is going to be very difficult if not impossible to get the ‘full’ level of cover required until some kind of normal working practices are reinstated in UK.

Summary underwriting limits

Despite the changes to the marketplace, protection providers remain open and able to provide at least some form of valuable cover. Despite the difficulties in completing full medical underwriting, cover can often be granted up to certain level as an interim measure, allowing more time to implement the full level of cover required.

Below is a summary of published underwriting limits for individuals without the automatic need for medical underwriting.

Age Life Only Life and Critical Illness Income Protection
40 £525,000 £400,000 £2,500pm
50 £310,000 £150,000 £1,250pm
60 £100,000 £100,000 £850pm

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