Insurance sized properly against the liabilities it is meant to cover
For most clients at this level, insurance is not the lead planning issue. But where it is needed, the difference between cover that is properly structured and cover that is loosely sized is often the difference between a clean estate transfer and a forced sale.
The discipline matters because the cost of getting it wrong only becomes visible at the moment the cover is meant to work.
Where insurance does meaningful work
Funding inheritance tax. For estates with predictable IHT exposure that cannot be planned away typically illiquid family homes, business interests, art, or property portfolios, life cover written under trust provides liquidity to settle the bill without forcing the sale of assets the family wants to retain. The cover needs to be sized against the actual projected IHT liability, structured under the right form of trust, and reviewed as the estate value changes.
Replacing income for a family. For clients whose financial plan depends on their continued earnings, typical for younger founders and executives still building life cover and income protection size the cover against the actual shortfall the family would face, not against an arbitrary multiple of salary. The maths is specific: what does the family need each year, for how many years, and what does the existing balance sheet already cover.
Shareholder protection. For owners of private businesses with one or more co-shareholders, the question of what happens to the deceased shareholder’s stake is a planning issue that matters as much as IHT. Properly structured shareholder protection arrangements, supported by cross-option agreements, fund the surviving shareholders’ purchase of the deceased’s stake preventing the worst-case outcome where a deceased’s family inherits the shares, the surviving shareholders cannot afford to buy them out, and the business stalls.
Key person cover. For businesses dependent on one or two individuals, key person policies provide the company with capital to absorb the cost of replacing the individual and to protect against the loss of revenue and continuity that would follow.
Where insurance does meaningful work
We are independent advisers across the whole UK protection market. We do not have provider relationships that bias the recommendation, and we work with clients on the underwriting process where it is non-trivial clients with material health history, complex business interests, or unusual occupations often need brokerage that goes beyond the standard online quote engines.
Where the planning is straightforward, we will say so directly and let the client buy through whichever route is easiest. Insurance brokerage is not a profit centre for us, and we are not commercially incentivised to over-prescribe.
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The answer is structural, not a rule of thumb. For IHT funding, the cover is sized against the projected estate value and IHT liability at the point of expected death, usually modelled across a range of scenarios. For family income replacement, the cover is sized against what the family would need each year for the relevant period, less what the existing balance sheet already provides. The exercise produces a specific number rather than a multiple of salary.
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For most cover taken out for IHT or estate planning purposes, yes, writing the policy under trust keeps the proceeds outside the estate, avoids probate delay, and ensures the trustees have the funds in hand to settle the IHT bill within HMRC’s deadlines. The right form of trust depends on the cover’s purpose and the client’s wider estate structure.
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Often not. For clients with significant existing wealth and relatively low ongoing income dependency, critical illness cover may be unnecessary, the existing balance sheet absorbs the financial impact of illness. For younger clients still in the accumulation phase, where a long-term illness would derail the plan, critical illness cover can be more relevant. The honest answer for many of our clients is that the cover is not warranted.
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