According to one of the largest UK life insurance companies, just 1% of life policies are written in trust. That is disgraceful and reflects poorly on the financial industry.
Let’s explain.
If your life insurance policy is “Written in Trust” then, in the event of a claim, the insurance company pays out directly to the beneficiaries you name on the policy. The significance of this is easily missed.
It means that if the policy is “Written in Trust”, the proceeds from the policy never form part of your legal estate and are not subject to Inheritance Tax. The importance of this is illustrated by the following figures:
Take Mr A. He’s a widower and wants to leave everything equally to his two sons. He owns his home which is currently worth £245,000 with a £10,000 outstanding mortgage. His investments are valued at £52,000 and his car and other chattels are worth £18,000. He also owns a life insurance policy for £100,000 which is not written in trust. We assume that the costs of administering his estate and obtaining probate would be £5,000.
If Mr A were to die now, his estate would be worth £400,000 less Inheritance Tax. Inheritance Tax is currently levied at 40% on the value of his estate over and above £275,000 - that means that the taxman will walk off with £50,000 and his sons would each receive £175,000.
Now lets assume exactly the same figures except that in this case the life insurance policy is “Written in Trust” with Mr A’s sons as equal beneficiaries. Because the life insurance company pays out directly to his sons, they each receive £50,000 straight away and non of the money is included in Mr A’s estate. This means that his estate is now worth £300,000 and the taxman can only walk away with £10,000. Each of his sons receives £20,000 more and tax-free!
So simply by signing a few forms, Mr A saves £40,000 tax!
Is there a catch? No - all the documentation is standard and is provided totally free of charge by the life insurance company. Your broker through whom you buy the policy, should complete the documentation for you, again free of charge. All you have to do is give the details of the beneficiaries to the broker and sign the form. Solicitors are not required. In the event of a claim, the life insurance company then has to pay out directly to the beneficiaries. Job done! Poor Mr Taxman!
Even if your policy is designed to repay a mortgage, it should be “Written in Trust” for your partner. Then, rather than your estate receiving the money and using it pay off the mortgage, the money can be paid directly to your partner. This saves legal delays, solicitor’s and probate fees and loads of hassle. Your partner can then use the money to personally pay off the mortgage. Whether this also saves you Inheritance tax will depend on the value of your estate and how you have structured your Will.
So we believe that a life insurance policy “Written I Trust” is a win win situation. And there aren’t many of those around these days! We can’t see any drawbacks.
Bye the way, no matter what you decide to do, always ensure that you have an up-to-date Will.
Express Life Insurance specialise in life insurance quotes uk but also offer both critical illness cover and life assurance policies.
When it comes to buying car insurance, it’s important to have an idea of what you’d like to be included in your policy–otherwise you’re more likely to be talked into purchasing more coverage than you need. And increasing your auto insurance premiums is probably something you’d like to avoid come renewal time.
So take a look at the coverage details below and keep in mind that an educated consumer is a powerful consumer!
The Basics
Nearly all states require you to carry auto insurance to protect you and other motorists on the road. Included in your auto insurance requirements are coverages in the forms of medical coverage or bodily injury and property damage.
Medical liability coverage pays for any damages to other motorists injured or in an accident for which you’re at fault. This coverage can be used to pay for medical bills, lost wages, as well as any legal fees you might face.
Property damage liability, as the name suggests, pays for damage you cause to other vehicles, as well as public or private property such as fences, buildings or road signs.
But how much coverage should you have?
Every state sets its own minimum coverage amounts. For example, in Arkansas, the state requires motorists to carry a minimum of $25,000 in bodily injury coverage per person, $50,000 in bodily injury coverage per accident and $25,000 for property damage. These limits are traditionally presented in the format: 25/50/25. This is the format you will see as you compare coverage amounts.
And while minimum coverage limits vary from state to state, most insurers would strongly advice that you carry more than the minimum amounts, especially when it comes to liability for bodily injury. The Insurance Information Institute has recommended that motorists carry $100,000 for bodily injury coverage per person and $300,000 in bodily injury coverage per accident.
Ultimately, the decision of how much liability coverage to carry is up to you. Be sure to ask your insurer how much your premium will go up by selecting higher coverage amounts–typically it will only add a few dollars to your monthly bill!
Other Coverages
In addition to the coverages required by your state, there are other protections you can add to your policy to maximize your protection. The most common added coverages include collision coverage and comprehensive coverage. Collision coverage pays for damage to your car resulting from a collision with another car or object. It can be added to your policy for an added fee and typically carries a deductible. A deductible is the amount that you pay out-of-pocket when filing a claim before the insurer assumes financial responsibility.
If you financed the purchase of your car, it’s possible that your lender will require you to carry collision coverage until the loan is paid off.
Additional tip: If you see your premium inflate after adding collision coverage, increase your deductible to see it fall. Just make sure you select an amount you can pay for if you have to file a claim!
Comprehensive coverage pays for damage to your car resulting from anything other than a collision. This could include anything from theft and vandalism to weather-related damage from floods or tornadoes.
Like collision coverage, if you financed the purchase of your car, your lender might require you to carry comprehensive coverage. You will also need to select a deductible, which will is likely to increase your premium.
Additional tip: After your car loan is paid off or the value of your car drops to under a couple thousand dollars, you can drop collision and comprehensive coverage and see a hefty drop in your auto insurance rates.
Special Services
In addition to beefing up your coverage, you can also add special services into your auto insurance policy.
Many insurers now offer rental car coverage, which protects you from damages if you’re in an accident while renting a car. Towing services may also be added to your auto insurance policy for an additional fee. If your car breaks down or you have an accident, the towing company affiliated with your insurance company may tow your vehicle free of charge.
Windshield replacement coverage is another coverage which has grown in popularity in recent years. If your windshield is cracked or shattered, the coverage will pay for the windshield to be fixed or replaced. Some insurers are now using windshield replacement as an incentive–the cost to repair a chipped windshield is much less expensive than replacing the whole front window.
Additional tip: Check your benefits and coverages in your car warranty and auto club membership to avoid doubling your coverage on special services!
Applying Lessons Learned
Now that you know the popular coverages included and added to auto insurance policies, you will have a better understanding of what your insurer offers you, why he or she makes certain recommendations and how to get the most out of your car insurance policy. Use these tips in combination with careful insurance shopping to find cheap car insurance with great protections!
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