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Life Insurance Shortfalls, How to Avoid Them and Protect Your Family

Life Insurance Shortfalls

Even if you have a Life Insurance Policy in force, are you sure you have enough to keep your family protected should the worst happen? According to a 2014 Scottish Widows report only around 50% of UK adults with a mortgage have life cover. That’s over 7 million adults without sufficient cover in place. 19% of those asked admitted they would not know how to cover their household bills should anything happen to them or their partner.

While many think that life insurance is only needed to cover a mortgage, there are other situations that can result in families being put at risk. Some examples are shown below and protecting them can make the difference between comfort and hardship for those left behind.

cover your family


Over 50% of universities now charge the maximum £9000 a year fees. Trying to ensure that your children have the best start in life is often very important. The average debt per student at the end of 2013/14 was £12,651. A term assurance policy can be designed to run until your child leaves university. As a result you will protect them in the event of your death and avoid substantial debt.


Often a business loan can only be drawn down if life cover is already in place. However, if you do have your own business, covering any business debt can avoid hardship to the family in the event of death.  Even without loans, does the family left behind know how to run the business prior to any sale? In the event of the business owner’s death, how would the family receive monies? If a business is jointly owned a policy can avoid many issues. For example, Shareholder Protection can ensure the deceased’s family receives proper value for the shares left in that company. If a business is owned in partnership, Partnership Protection can ensure the deceased’s family receives proper value for the share of the partnership that they are left.


Mortgages are probably the major reason for getting a Life Policy in the UK. Ensuring that your family home is owned outright is often a priority. However, there are many other sources of debt that could create hardship for your family in your absence.

As of June 2016, the average household in the UK had substantial consumer debt. Whilst this may not seem a huge burden, life assurance to cover this can avoid hardship on death of income winner(s).

cover your family


Inheritance tax and increasing funeral costs can add to your family’s burden. Although the terminology seems unduly complicated, calculating potential inheritance tax is actually quite simple.  Once that calculation is done, a simple life cover policy can be put in place to pay the tax bill when it falls due. That policy can be arranged to increase or decrease each year to reflect appreciation of your assets, or gifts being made and tax covered during the run off period.


Inheritance Tax Planning advice is not regulated by the Financial Conduct Authority

Life Cover (non-investment) and income protection-The plan will have no cash value at any time, and will cease at the end of the term. If premiums are not maintained, then cover will lapse.

Call Be Financially Secure for more details

To safeguard your family’s financial security call Be Financially Secure on 01273 495446 or click here.

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Secure your family’s future with the right trust.


How do they work? Most people know of them but not how one can benefit by them. On your death, instead of paying the sum assured from your life policy direct to your estate, the payment goes into trust. This means that the proceeds should not be liable for inheritance tax. Additionally, because the funds are not subject to probate, they will be released to your family a lot quicker.


On death, the money is paid to the trustee(s), who are trusted by the settlor to ensure that they go to the beneficiaries specified. The settlor is normally the owner of the policy and invariably the life assured. The trustee(s) are persons picked by the settlor to ensure that the trust is dealt with correctly. The beneficiaries are those who will benefit from the trust.


There are many different variations of trust and its correct choice is important. Choose the wrong trust and you could end up with monies going to the taxman. Looking at the main types:

Absolute Vs Flexible

Simply put, a trust can be absolute or flexible. Their names sum them up pretty well. In the case of an absolute, (or bare), trust, once it is in place it cannot be changed. It is an absolute agreement which is set in stone. On the other hand, a flexible, (or discretionary), trust is just that, flexible. The details can be changed at any time, as long as there is an agreement between the settlor and all trustees listed in the trust.




Gift or Split Trusts

Often the purpose of any life insurance policy is to provide a ‘gift’ from you to your family after you have died. With some policies, you may also have critical illness cover. In the event of you suffering a critical illness, you may need the money rather than gifting them into the trust. In this case, you would split the trust to retain any proceeds from a critical illness claim. At the same time you would gift any life pay-out. Some policies will also pay out in the event of a terminal illness. Some clients prefer this is gifted to the trust while some prefer to retain the monies. This will allow them to be distributed prior to death (but there can be tax consequences).

Business Trusts

There are many types of business trust, from shareholder and partnership protection to key person to relevant life.

Shareholder protection

Shareholder protection is usually designed to pay-out sufficient proceeds to allow the surviving shareholders to buy out the deceased shareholding from their family. This can provide continuity of the company. This will also ensure that the family of the deceased shareholder receives a pre-agreed amount for their shares.

Partnership protection

Partnership protection is usually designed to pay out sufficient proceeds to allow the surviving partner(s) to buy out the deceased partner’s interest in the business from their family. Again, this can provide continuity of the business and ensure the family of the deceased partner receives a pre-agreed amount for their share of the business. 

Key person protection

Key person protection will provide a pay-out to the company in the event of the death of an employee or shareholder who is integral to the company. The monies received by the company are used, often, to help replace that member of staff.  

Relevant Life Protection

With relevant life trusts, the settlor is a company, normally the employer of the life assured. The life assured is usually a director/shareholder but can be an employee. With Relevant Life policies, the life assured chooses additional trustees and also chooses who he/she wants as beneficiaries. This can be the life assured’s spouse and children. In this way, your family will benefit in the event of your death. There are also substantial tax benefits for arranging life cover under Relevant Life policies.


There are many more variations to trusts than those listed above and other benefits for arranging business and Relevant Life policies. At Be Financially Secure, we can make sure that you have the right level of advice We are totally independent protection specialists and offer independent advice.



Trusts and Taxation advice are not regulated by the Financial Conduct Authority

Life Cover (non-investment) and income protection-The plan will have no cash value at any time, and will cease at the end of the term. If premiums are not maintained, then cover will lapse

Should you require any advice call us now on 01273 495446.

All sources available at

Trust Family Protection