The purpose of life cover is to make a tax-free payment when you pass away. This payment can be made almost immediately after death and can help bereaved family members in making necessary arrangements. The most common type of life cover is taken out to cover debt (such as a mortgage
), but there are various forms of life insurance available. Some may pay out on a regular basis to cover childcare costs and others may pay out a lump sum to help mitigate an Inheritance tax liability.
A common mistake made by many people is that they don’t write their life cover into trust, which can mean that when the life insurance policy pays out, it is paid into the estate rather than a specific beneficiary, which can cause delays in getting the money to the person who really needs it, or even create an Inheritance tax liability. This is why it is essential to seek advice when considering your needs in this area.