Personal Protection

Background

Mr and Mrs Little both work and save into a pension. The couple decided they wanted to review the pensions as well as their other financial arrangements. They were open minded to an independent review as, by their own admission, they felt like that had not planned adequately for the future.

Mr Little is aged 52 and has some pre-existing health conditions. Mrs Little is 50 and in good health. They have two children: a son of 18 and a daughter of 19.

Problem

Mr and Mrs Little had life cover for the mortgage of approximately £60,000 but no additional protection. They had two children who they believed would remain dependent upon them for approximately seven years, until the youngest reached age 25.

Given their income and expenditure, Mr and Mrs Little had a strict budget of £50. They prioritised the support of their children in the event of their own death and wanted to ensure that all household expenses could be covered while the children were still dependent upon them. Estimated expenses were approximately £20,000 per annum.

Cover in the event of losing their income, or a shortfall due to critical illness, were not priorities for the Littles at this stage.

Solution

Fiducia recommended that Mr and Mrs Little each set-up Family Income Benefit (FIB) that would provide £20,000 per year for up to seven years. Having conducted thorough market research, the most competitive premiums quoted were £11.70 for Mr Little and £10.29 for Mrs Little. Due to some pre-existing medical conditions and lifestyle questions, the post-underwriting premium was £21.09 for Mr Little and £16.03 for Mrs Little.

It was recommended that the Littles take out this cover for the seven years until the children were both living independently of them. The policy was to be written in trust to ensure that the family benefits from the proceeds in the right way and in a timely manner.

Whilst recommending this, Fiducia also provided a breakdown of costs to be fully protected. This included income protection and critical illness cover as well as a replacement mortgage protection to include critical illness cover. Mr and Mrs Little had decided the Family Income Benefit was the only priority at this stage.

Mr and Mrs Little also had no wills or power of attorney and it was strongly recommended that they consider these as well. Fiducia recommended a couple of reputable local firms

Case study learning points

• Always take advice when reviewing your protection arrangements. You are under no obligation to proceed with our recommendations.
• Whilst there is a plethora of protection solutions available, the adviser will go through everything to make the experience less overwhelming.
• Whilst pre-existing medical conditions can increase the premium, it does not necessarily mean that you cannot obtain cover.
• Trusts are key in ensuring that the proceeds are paid out in a timely manner and that the intended beneficiary receives the proceeds. There are different types of trusts so do take advice.