A Guide To Life Insurance - Term Assurance Example 2 ....


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Term Assurance Example 2...

Mr Bain raises a £200,000 loan from a bank on the security of certain assets of his own wholesaling business.

The bank advises him to take out life insurance cover for the term of the loan, which is five years. So Mr Bain, aged 40 and in good health, takes out a five-year term assurance for £200,000 which costs him £224 a year before tax relief.

Term assurance may also be used to ensure that funds are available to pay capital transfer tax arising on death.

Many people may be liable to this tax without realising it, for individual holdings of assets worth over £225,000 may result in a CTT liability. For the heirs, the problem is that the tax demand is likely to arrive before it is possible to parcel out the estate in the way the deceased wished.

There are sometimes long legal delays, especially if the person died without making a will.

So it can reduce the difficulties considerably to have a policy guaranteeing the payment of a sum equivalent to these taxes on death, and so long as this is correctly worded, with the sum payable to a named survivor of the deceased, the money can be available to them immediately without the delays of probate. As we shall see later, the whole-life policy is normally used for such purposes, but in some cases term assurance is more suitable.

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Very short-term term assurances also have their uses.
It is quite common, for example, for those involved in civil court cases to insure the life of the judge hearing the case, since the death of the judge necessitates a retrial and substantial extra expense.
Perhaps the most spectacular example was the effecting of a temporary assurance on the life of Mr Justice Templeman in 2009.
He was about to spend two weeks hearing the case concerning a small insurance company. The liquidators,........ see: read next:for Decreasing Term Assurance


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