Who “benefits” from your Life Insurance Policy

by Mark Williams DipFA, Life Consultant, FUW Insurance Services Ltd

Business Protection vs Personal Protection

The above products are designed to pay out, sometimes, on life cover only. I will try to explain the difference between the two, with life cover only, in mind.

Personal Protection

This is designed to pay out life cover, if the “life Assured” was to die. The “proceeds” of the policy is paid out to the “policy holder”. If the “life assured was the policyholder, it is paid out into their estate, then to their next of kin. A trust form can be completed, this enables the “life assured” to designate who they want the “proceeds” to go to.

Business Protection

This is designed to pay out life cover, if the “life Assured” was to die. The “proceeds” of the policy is paid out to the “policy holder”, which is usually the company or business that is named on the proposal form. This guarantees the “proceeds” are paid out, straight to the business concerned.

I have given a lot of advice to farmers over the years, and have been surprised by the number of “personal protection” policies they have, to cover their businesses.

If your son/daughter has a personal protection policy for life cover, that plan will pay out to their next of kin, not directly to the business.

I gave advice to a farmer the other day, he wanted life cover on his son, who is at present single. The son had just become a partner in the business, and they were purchasing extra land. He wanted to take out personal protection life cover for his son.

I explained that personal protection would pay out to his son’s next of kin. The farmer explained that, as his son was single, the policy would pay out to himself and his wife. The policy was for a term of 30 years, and I explained that if his son got married, the proceeds in the future, (if no trust form was completed), would pay out to his future wife, then hopefully given to the business.

To properly protect your business, you should have business protection, with the company or business named on the policy. Make sure your policy is designed to pay out to the appropriate “beneficiary”.

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