Updated 03 December 2020
Benefit cuts mean widowed parents will now lose up to Â£100,000 if the worse should happen. But there is good news, insists Scott Gallacher.
Following on from my previous blog, Donât think you need protection?, I was shocked to read that every 22 minutes a child in the UK loses a parent*.
This depressing statistic makes the news that widowed parents now face losing up to Â£100,000 in benefits due to benefit cuts even more concerning.
From April 2016 the government is replacing three existing bereavement benefits with a new, single bereavement benefit to be known as a bereavement support payment.
Under the new rules the lump sum will increase from Â£2,000 up to Â£5,000 (Â£2,500 for those without dependent children) and this is clearly to be welcomed. However the regular payments are lower and most importantly limited to one year only. This means that parent with young children lose out most.
“Fortunately, Â£100,000 of joint life cover for a non-smoking couple aged 37 and 35 and in good health costs less than 50p a day for 20 years of cover”
For example, a pregnant wife losing her husband would have received over Â£114,000 under the current system (Â£2,000 plus Â£108.30 per week for up to 20 years). Under the new system she would only receive Â£9,800 (Â£5,000 plus Â£400 per month for one year). This is a total loss of up to almost Â£105,000.
Given the above it is even more important that people, especially those with young children, review their life assurance arrangements. But there is some good news! Fortunately life insurance for those in good health is surprisingly cheap.
For example, Â£100,000 of joint life cover for a non-smoking couple aged 37 and 35 and in good health costs less than 50p a day (less than Â£15 per month) for 20 years of cover.
Parents should contact a financial adviser today, not only to review their cover and obtain a good deal, but also for the help and advice in completing the forms and the use trusts to minimise inheritance tax and ensure families are protected.
In addition, for new parents many financial advisers are able to help you make a small step in the right direction by being able to arrange Â£10,000 of free life cover if a parent dies on or before their babyâs first birthday. If both parents apply for the cover, this could mean Â£20,000 of life cover.*Source â Aviva