This week we are joined by WealthBuilders SSAS Director, Paul Brooks as we dive into the world of wealth protection. In this captivating episode, Paul reveals the three crucial insurance policies that can shield your assets, ensure financial stability, and provide peace of mind for you and your loved ones. From debunking common misconceptions to highlighting the often overlooked benefits, this engaging discussion sheds light on why these policies should be on your radar. Are you looking to fortify your financial well-being and protect what matters most to you? Make sure you don’t miss this episode.
This week we are joined by WealthBuilders SSAS Director, Paul Brooks as we dive into the world of wealth protection.
In this captivating episode, Paul reveals the three crucial insurance policies that can shield your assets, ensure financial stability, and provide peace of mind for you and your loved ones.
From debunking common misconceptions to highlighting the often overlooked benefits, this engaging discussion sheds light on why these policies should be on your radar.
Are you looking to fortify your financial well-being and protect what matters most to you?
Make sure you don’t miss this episode.
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Speaker 1 0:01
The purpose of wealth talk is to educate, inform, and hopefully entertain you on the subject of building your wealth. Wealth builders recommends you should always take independent financial tax or legal advice before making any decisions around your finances.
Christian Rodwell 0:19
Welcome to Episode 198 of wealth talk. My name is Christian Rodwell, the membership director for wealth builders joined today by our founder, Mr. Kevin Whelan. Hello, Kevin.
Unknown Speaker 0:29
Cruz, good to be with you on this sunny day.
Christian Rodwell 0:32
Yeah, yeah. Good to be back again, have you been battling chat GPT any more since our recent episodes
Speaker 3 0:39
have been battling it, but certainly been exploring it and thinking about it, and some relevance AI in particular to this particular topic you've selected for today, which is really how we titled today, what's the title of bunkers,
Christian Rodwell 0:57
today is three essential insurance policies you should consider.
Speaker 3 1:02
Alright, well, it's not a very sexy title. So let's set up a beachy look, the way I see it, and I've mentioned this several times, now, we're all living longer. So if we're living longer, we've got the risk of living longer to deal with. But of course, the corollary of that is some people will die too soon. So both are risks. Dying too soon, is a risk to the family left behind and living too long as a risk to you. And also a risk to the next generation. So somewhere in the midst of all of this, it's not about policies, it's not about plans and products. It's about you recognising as an individual as a wealth builder, or a potential wealth builder, that you are in the risk management business. But you have to be, because if you live a long life, you've got to manage your money. And if you die, you've got to manage the expectations of next generation in either way, you've got to consider the impact on other people, and in my experiences, people don't want to do that. And they don't seek the clarity of being able to make the assessment of what risk really means. And risk really means something could go wrong in your life. What are the consequences of that going wrong? And how do you feel about those consequences? And once you have awareness, and I think the key to this is awareness. So it means having a chat with yourself, not a chat GPT but a chat with yourself and go right, how do I really feel about this? What's my view? About my family? What's my view about me and my family? What's my view about the next generation? And unfortunately, so few people do that. And I'd like to encourage the debate, the self debate or the family debate, because my own father died, with no will no power of attorney, no life cover no business succession plan, nothing, and set the family backwards. That wasn't an intended plan. That was just a lack of attention to detail and taking the time to make an assessment. So to me, the big fry out for me, is stop and have a think about it. And then once you think about it, you can make a reasonable assessment of whether you want to accept the risk and go are self insured. But because we self insure every day, do you have a risk? You have a policy, Chris, that if your washing machine breaks down, you will to cover the replacement of it? Or do you just buy a new washing machine when it breaks down? But I'm assuming you'd be like me, he's gonna look good enough cashflow, then things that that would be irritating, but not devastating. So you shouldn't insure it. Things that you should insure, or at least consider the insurance is things that will be devastating. And the kind of wealth building view of devastation is each person should think about it. But the dying too soon is definitely one. And I know we listen to Paul picking up on that. And he dives into the factual stuff. And it's useful, but it doesn't help in the risk assessment. So you know, maybe we should let Paul talk about the practices and the principles, and then you and I can dive into well, okay, so how does that How can you think about it, because unless you do the thinking, whether you've got something called this policy or that policies or is is irrelevant. It's like you're driving a car. Your outcomes you want to get from A to B, you don't really care whether was a forward whether it's evolved or not. At the beginning, if cars didn't exist, you know, or cars or brands you didn't know about, you just want to get from A to B. So you'd better work out. That's my objective want to get from A to B, then what's the best way to do it? Is it to walk as a disciple? Is it again on a horse? Or is it driving a car, and you'd work out what it is you want to do. And so it is with this, you have to work out your destination, what's important to you, first, and not important to somebody else.
Christian Rodwell 5:27
And I should just point out as well, that we are breaking this down into two parts. So this week, we're focusing on the individual. So personal cover and protection. Next week, we're going to be focused on protection for business owners. So two part podcast, but yeah, probably good point for us to break and head on over to our conversation with SAS director, Mr. Paul Brooks. Hello, Paul. Welcome back to wealth talk. How are
Unknown Speaker 5:51
you? Yeah. Hi, Chris. I'm great. Thanks. Good to be back.
Christian Rodwell 5:54
Yeah, yeah, well, not hasn't been too long. This time. It was back in March, Episode 185. Where were you last appeared. And obviously, we're in communication every day running wealth builders and looking after our members. And today we are focusing on really important topic read. It's actually part one of a two part kind of podcast series, we're going to do it all around the topic of protection, but today focusing on personal protection. And really, you know, protecting yourself and your loved ones. If the worst happens. So important stuff.
Speaker 4 6:30
Absolutely. Yeah. Really a and yeah, I guess it might sound if you're just tuning in, like we're talking about, you know, personal protection bodyguards. Now we're talking about life cover and other things that are designed to protect you in the event of the worst happening, right. So yeah,
Christian Rodwell 6:45
yeah, that's it. So before we get into the three things that you you need to think about here, in terms of your personal protection, your wealth and your family. Let's look at really the problem that exists here. So, you know, what are some of the common reasons you see that stock, either stop people from taking out the right protection or getting it wrong? So but what are some of those things, Paul?
Speaker 4 7:09
Yeah, I think honestly, there are two or three key things. The first one is nearly always cost. You know, people either have a feeling that life cover, or one of the other types of cover that I'll talk about today is very expensive. So they just don't do it. Sometimes it's this feeling that insurance companies never pay out, and they'll do everything they can not to pay out. And so why bother taking it, it's a waste of money, statistically, actually not true. You know, life cover life insurance companies want to pay claims, they want to have a claims record, that's good. Because otherwise people wouldn't take insurance. But nonetheless, definitely, people have that perception. And that feeling that negative feeling towards those companies can also be a bit complicated. You know, there are several types of cover. And it's easy. Unless you've got someone who's an expert in the topic guiding you through it, or you're, you're confident and comfortable to do research and things online to not be sure exactly what it is you're getting, you know, perhaps end up with the wrong thing. I would say they're the three most common issues that I've come across. Certainly,
Christian Rodwell 8:23
yeah. And I suppose no one really teaches you what you need delay. It's not something you've learned in school. And, you know, some people are a bit more switched on and, you know, get it get it sorted. But it's easy to just not get it sorted, isn't it? Because?
Speaker 4 8:38
Absolutely, yeah, it really is, you know, as you as you say, it's, it's one of the many things we don't teach to people at school or actually, even in higher education. And, you know, some people are lucky that in their job, they might have, you know, benefits provided. And some of those benefits are some of the things we'll talk about today. So you don't have to think about it, it's already there as part of your package. But for people that don't, or for people that need more protection. You know, you it's it's really quite an important topic. And I'm quite passionate about actually, because it was something that I used to be involved in some years ago. And really, for me, it was quite integral. And of course, for us wealth builders. It's an integral part of what we teach, isn't it in the foundation of the academy? Yeah, really is one of those key principles to protecting family and assets. So,
Christian Rodwell 9:31
yeah, so it's probably worth just expanding a little bit on, you know, your background experience there, Paul, just so we know you're qualified to talk about this topic?
Speaker 4 9:39
Yeah. Well, sure. I mean, in case you didn't know, I used to be a financial advisor. And one of my passions was protection. You know, I really, there's there's such a huge number of people that have no cover at all, and even More probably still that have some cover, but probably not enough. You know, one of the things that I used to help people really focus on is getting the right cover for the right amount of time. And at the right price and making sure that you had the protection, you need it, but you weren't paying the earth for it. One of the things that you see a lot is people who have over insured, they've taken out, sometimes way more cover than they need. And we'll come on to it a bit later. But you know, one of the key elements that determines the cost of any cover is how long it's going to protect you for. And I think, you know, part of my passion was making sure people had great cover, but they weren't over ensuring they were getting covered at a time where they were vulnerable, where they were most at risk. And again, I guess, you know, that relates back to the principles and we teach Chris doesn't it, you know, making sure that whilst you not at a point of financial security or financial independence, depending on whichever level is, you know, the one you're striving for at the time, that's the time where you should consider having cover to protect you, when you're at that place, you can choose to have that cover, but you're far less reliant on having those extra protections in place.
Christian Rodwell 11:23
Okay, so let's break down then the three key types of insurance for our listeners pull in simple terms, so that they can understand, you know, have they got the right cover? And what to do, if you haven't. So let's start with the first type of protection. Which one is that?
Speaker 4 11:42
Well, I mean, very simply, and easily. The first one we should should start with is just straightforward life cover. Sometimes it goes by some slightly snazzy names, you know, the financial industry is full of jargon. So it's called term assurance. Sometimes it's just called protection. But basically, what we're talking about here is life cover. So in the simplest possible terms, if you die, during the term of the policy, during the length of time that you've covered yourself, for you would get you your loved ones would get a lump sum, typically, it can be an income, it depends, but usually a lump sum paid out by the insurance company, usually included within those kinds of policies is actually something called terminal illness without getting into too much detail. As the name suggests, if you are diagnosed with a terminal illness, and that means an expectation of not living longer than a year, then under those conditions, usually a life insurance policy would pay out in advance to help you with making sure you're looked after you get the health and palliative care you need, et cetera, et cetera, all the things that you might need, if that was something that you know, you were at that stage in your life, not a fantastic topic to talk about, you know, and again, possibly the reason why people don't think about insurance, because they don't want to have to think about what would happen if they or someone they loved was no longer there. But really, really important, if you for any number of reasons would want your family or people that you care about to receive some money if you were no longer there.
Christian Rodwell 13:26
Now, this is something you can take out yourself, right? Personal, is it something as well, for people who are employed, may get this through their? Through their, their, their employer?
Speaker 4 13:37
They may well do? Yeah, so lots of people nowadays, as well as getting things like a pension from their employer, you may well have heard the term death in service. So death in service is usually part of a group policy. So you're you're a business you might employ any number of people, you go to an insurance company, they can set you up with a group policy, it's very easy to add and remove people, usually with limited or even no underwriting, which means they don't even look into your health and your lifestyle. But usually, that's only available through employment. So if you're employed, you're not sure if you've got it, do check out you know, do check out with your with your employer, your HR team, to find out what type of life cover or death in service company you've got. Yeah, absolutely. is pretty standard for most employees, depending on where you work.
Christian Rodwell 14:35
Now, you know, we'll come on to kind of what to do if you haven't got this. But, of course, in all cases, it's speaking with a professional advisor who will be able to talk you through all of this and understand, you know, hopefully work out the length of term and give you all of the information that you need to make the right decision.
Speaker 4 14:54
Yeah, absolutely. Absolutely. You know, it's important to to seek advice if it's not something you're confident about. And also, actually, because ifas, financial advisors and even protection specialists who just focus primarily on this, have a range of tools where they can search the whole of the market. And one of the biggest traps that I see people fall into is they just go down to their bank, and take out a life insurance policy with their bank, which is actually never provided by their bank, it's always provided by one of the same insurance companies that you would get recommended to you if you went to a financial advisor. But the difference is, the premiums can be higher, because the bank has to make something from the transaction. And secondly, even if it doesn't, they only offer cover from one insurance provider. So instead of looking at the whole of the market, and insurance is a weird thing, it's it's really strange, not just life insurance, but all insurance, one insurance provider could charge you X number of pounds per 10,000 pounds of cover, and another could charge you significantly less, because they all have a different way of assessing risk. So to someone your age category and your lifestyle and your status may be low risk for someone else, it may be high risk. So there can be a real difference between the premiums.
Christian Rodwell 16:17
Now, I don't know if I remember this correctly. Porn it may have been even Kevin saying this may have been a previous podcast, I've got it in my head that the people selling the insurance get paid based on the term. So the longer the term, the bigger the payout, is that correct?
Speaker 4 16:33
Yes, it is. In lots of cases, I suppose it depends really how the person who's recommending the cover to you gets paid. And there are usually only two ways they either get paid a commission by the insurance provider. And that commission is based on the calculation of how much cover you're taking. But one of the biggest factors, you're absolutely right is how long is the term of the cover. The longer the term, the bigger the commission. However, lots of ifs, and lots of protection specialists have moved away from commission and have gone to fix fees. So they will charge a fee of whatever that may be 500 pounds, 1000 pounds to do a piece of work, which includes searching the market, finding an appropriate insurer or recommending the one that they believe is going to suit your needs the best. And in many, if not most cases, they would sacrifice the commission. So there's no commission payable, you've paid a fee. And actually, therefore, that commission is removed from the transaction, which can have an impact or big impact on premiums, not always. So sometimes it's a combination of those two things, but the regulated professional you're working with will always be transparent about how they're going to get paid. And you can sometimes choose which route you want to take if you don't want to pay an upfront fee, you can pay by commission. Yeah.
Christian Rodwell 17:46
So that might be for some people, you know, good to just get that out of the way and understand that before they begin the discussions.
Speaker 4 17:52
Yeah, absolutely. And whenever you engage with a financial advisor or a regulated advisor, they always have to make sure that they tell you how they get paid.
Christian Rodwell 18:00
Okay, great. So anything else to cover on life cover their poll that we have?
Speaker 4 18:06
I guess all that would be worth summarising is some of the key reasons why you might want life cover. And there could be many right, so I'm just going to categorise the top few. Probably the most obvious one is paying off a big debt, like a mortgage. You know, if you've got a family, especially if you've got children, and you are one off or the only breadwinner for one of the better expression, and your income into your household is what pays some or all of the mortgage and you will now no longer here. Sadly, the mortgage company isn't going to care, you know, the mortgage still needs to be paid. Now at best that can be serious upheaval, it means at a time where things are already traumatic, you then might have to think about going to get a job or you know, doing something else to bring some more income in or possibly even downsizing or moving because you can't afford to pay the mortgage. At worst, it could mean you lose your house. So having some insurance there to cover either a pot of money that allows you to continue paying the mortgage or a pot of money that allows you to pay the mortgage off completely, could be hugely, hugely beneficial. If you've lost someone who, you know, makes a big contribution to the household and let's not dismiss the hugely important role of the homemaker. You know, nowadays, men and women more and more have a dynamic where one of them is working. One of them is not the one who is not plays a significantly important role in keeping the family running and taking the kids and tutoring and all sorts of different things. And again, the loss of that person aside from the obvious devastation to the family can have a massive financial impact. The breadwinner might have to take time off of work to now replace the role that you know the mum or dad who's died did or you might have to bring in For the children, you know, a nanny, or after school clubs, all those things can add up. So it's not just the family disruption, it's the financial disruption. And that's exactly what life insurance is designed to do is designed to ease the burden and make things better for the people you leave behind. So raising a lump sum to pay the mortgage off raising a lump sum to have a lump sum of money in the bank to give a safety net, two very common reasons why you might think about life insurance, as well as any other debts, you've got credit cards, loans, car agreements, you know, all sorts of things.
Christian Rodwell 20:35
Yeah. Great. Okay, then. So to move on to the second type of insurance, and we're talking about personal insurance, just to kind of prompt the next episode where we'll be focusing on business protection specifically for business owners, but But what would be the second type that people should be thinking about? But yeah, absolutely.
Speaker 4 20:55
So the next, for me, certainly most underused type of insurance is critical illness cover. So critical illness cover. By the way, most cases, critical illness cover usually also covers you for death. So you're getting like a two for one, because the life insurance bit is the cheap bit. Critical Illness cover is designed to pay out if you get diagnosed with one of nowadays, it could be as many as 50 different 60 different types of illnesses conditions. And they range significantly from the severe and the things that most people know cancers and strokes and heart attacks. By the way, they're three of the top four most claimed things on any critical illness policy, to things like being hospitalised and being in a coma for longer than a week. That is an example of something that might happen to you out of the blue without being in bad health. But that could seriously derail all sorts of things. And that kind of thing is covered under a critical illness policy. So it's usually a lump sum payout, if you make the diagnosis of a specific type of thing covered on the policy, and usually, with at least a certain level of severity. And nowadays, and for a long time, actually, insurance companies have found ways of almost adding on the ability to claim for lower severity things. So if you don't quite meet the full definition of a cancer claim, I'll give you a good example. You might not have a certain stage of cancer, let's say you had your a man you had testicular cancer, you don't necessarily meet the full grading and staging that that cancer needs to be at the severity, it needs to be out to be impactful enough, at least in the eyes of the insurance company to mean a payout is due. But they have a little almost like little extra that comes as part of the policy that says if you have testicular cancer, and it's sort of at least this minus severity, will pay you a lump sum of 25,000 pounds, for example, I'm just freewheeling here. But you get the point that in itself can be hugely valuable. Because hopefully, if you do have something wrong, the chances are if you're catch it early enough, it's treatable. It doesn't have a significant impact on your life or your longevity, let's say, but it's still disruptive in disruptive in the short term, you know, you might have to come off, stop working, you might have to have extra treatment, all those things have an impact financially. So you know, those little things can really make a big difference. And again, you know, more and more of those things are usually added. But as I say, the top four, most claimed conditions on any policy with any insurer have always been heart attack, stroke, cancer and multiple sclerosis. What's pretty cool about critical illness cover actually, and you can tell I'm passionate about it, because it's probably probably going on a bit too much about it here, Chris. So I apologise in advance and jump in if you need to shut me out. But you also get cover for children. So critical illness cover actually usually covers, in most cases up to two children under the age of 18. Sometimes even under the age of 21. For a list of conditions that is nearly always very similar to the main conditions that would cover you. And if your child was diagnosed with one of those things, there would be a payout. Again, that doesn't impact your main policy, it doesn't then mean the policies cancelled, it doesn't then say that's it, we've paid the claim it's done. This is in addition to any claim that you might then make in the future. So again, you know, the worst thing any parent can think about is their child being ill seriously or not, but you know, having that financial protection there that if your child was ill that you could claim on the policy and that that would give you some financial protection whilst you're focusing everything you've got on making sure your child gets better The knees is a great added benefit. That's probably where our stop because I could go on for a while about critical illness cover. It's a bit more comprehensive than life cover because it's about ill health, or a set of circumstances where your health at least temporarily is not as good as it should be.
Christian Rodwell 25:15
I think you've put forward a good argument.
Speaker 4 25:16
Yeah, well, thank you, you can tell I'm passionate, I'm sure. But statistically, you're much, much more likely to claim on a critical illness policy than you are in life insurance policy, if you think about it, because let's say even if you said up until the age of 65, statistically, the chances of someone who's in reasonable health dying before the age of 65 are very small, but actually having some kind of serious illness and we see all these kinds of scary stats. Every year when you know, Stand Up to Cancer comes around, for example, that says now one in two people will get cancer at some point in their lives. Obviously, cancer is a really commonly feared illness. One of the most claims, illnesses on a on a policy like this, having that peace of mind, I think is is important. And as I say, statistically, you're more likely to need to claim on it. But of course, that's impacted in the cost, which I'm sure we'll come on to.
Christian Rodwell 26:12
Yeah, we'll touch on that in a moment. Great. So move moving on, then, what's the third type of insurance, we should
Speaker 4 26:21
learn insurance. Similarly to critical illness, it doesn't involve you dying, but it does involve you getting unwell. It's called income protection. Sometimes goes by a different name, but usually income protection. And income protection. Pretty much does what it says on the tin, you know, if you are ill, for any reason. So unlike critical illness, no clearly defined list of conditions you have to meet if you are ill. And it's either mental, physical, or disease and illness. Something that is stopping you from going to do your day to day job. Whatever that might be, you get a replacement of your salary, or at least a percentage of your salary for the duration of the time that you're off. So doesn't pay out a lump sum critical illness and life cover usually pay out a lump sum, they can be created to pay out an income but they're not commonly, income protection pays out a regular recurring income that's designed to replace some of your salary up until the point where you're either well enough to return to work. Or in the worst case, if you're never well enough to return to work, then until the end of the length of the term that you've selected. So you know, if you're very unlucky, and you know, you have to be off work for a long time, that can have a devastating impact on your lifestyle, on your finances, on your family. Having income protection could give you the safety net, you need to ensure that you can at least carry on paying your mortgage, your rent, your household bills, you know, everything that you need to make yourself and your family function whilst you're getting better. And of course, some people take a combination of life cover and critical illness and income protection, everyone's different. Again, that important point that I mentioned earlier about don't over insure, but these are different products, you know, income protection is not the same as critical illness, it might be that you choose one over the other, and that will always depend on your views and your independent your individual circumstances.
Christian Rodwell 28:35
That's really good summary. Thanks, Paul. And, you know, of course, we can hear your passion coming through this is a core part of the roof as we refer to it step three in the wealth building process, and we make sure that people really assess the wills, powers of attorney homeownership and, and cover, which is what we're talking about today. And for anyone who's listening poor, of course, we're happy to help connect people so they can have those discussions. We've got trusted by FA partners, who we'd be more than happy to connect people to for independent review of either what they've currently got to make sure it's the right cover, or to get some cover set up and probably just dropping us an email Hello at wealth builders.co.uk would be the best way to start that conversation, I would say,
Speaker 4 29:21
yeah, absolutely. Absolutely. You know, it can, it can be such a great exercise because even if you've got good cover, and it's the right level, you might find that actually you can get the same cover for less somewhere else. Or you might find you've got good cover, but you haven't got quite enough so you can arrange a small top up policy, there are all kinds of different things you can do.
Christian Rodwell 29:40
They've given us a few good examples already pulled but just to really sort of, you know, reinforce why it's so important to at least have a conversation with someone to make sure that you've got what you need. And, of course, you know, we can think of you know, some quite, quite terrible circumstances if perhaps you don't have Same place, are there any, you know, previous experiences where there's a good outcome? You know, there's been, you know, kind of a happy ending, shall we say?
Speaker 4 30:08
Well, you know, there is, and there's one that I'll always remember and always sticks with me or be actually, it's probably a bit of a happy ending and a sad ending, years and years ago. Now, again, when I said, I mean, this was when I first started off in the financial industry, and, and I was focusing on protection, that's where I really found a passion for it. I was, you know, speaking with, with a client who was diabetic, again, very, very common in the UK, you know, diabetes, if managed, well, obviously, usually is is, you know, has a limited impact on your life. But of course, it can be much more severe. I can't remember the particular details of this individual client. But he, we went through the process, and we approached the insurance companies, and they were prepared to cover him, but they did what were they applied what was called a loading Teads premium, which is basically, they assessed his medical situation, they wrote to his doctor, they gathered these information. And they assessed that he was more of a risk. And therefore they applied an increase to his premium. And he undenied about whether to take it and you know, thankfully, really stressing the importance of actually, if you have ill health, and it might be well managed, and it might not have a massive impact on your life day to day. But if you are it statistically more likely to get more seriously ill or to die before you should do because of your ill health. Arguably, it's even more reason to have protection. Because although you might pay more the premium might be more than a standard insurance premium would be the fact that they've taken your health into consideration. And they've still offered you cover and they've offered a premium loading really ratifies for me that it's more likely that you will statistically need that cover. Not everyone does, of course, but I got a phone call about 10 or 12 months later from this person's wife, who, you know, obviously was very sad to tell me that he passed away. But thankfully, he taken the cover out. And so she was feeling hugely relieved and going through the claim process, making sure that her and her children were financially looked after, because he'd done the right thing and taken out the cover, despite the fact that premium have gone up. And thank goodness he did, because otherwise they could have been in a serious situation.
Christian Rodwell 32:28
Yeah, yeah. No, that's that's a good example, a sad ending, of course, but yeah, stresses the importance, once again. So yeah, hopefully, we have given a simplistic kind of breakdown today, you've done a really good job there, Paul, just to summarise and then, you know, don't don't over insure, you know, over insure absolutely critical. Your lifestyle into consideration and
Speaker 4 32:58
health, health and lifestyle is always got a big role to play, you know, if you're healthy, generally speaking, your premium should be okay, if you have a health condition, or you have a serious lifestyle condition, like you like to go and go mountain climbing, you know, that kind of thing can sometimes have an impact, but again, more likely to need to make a claim. So, you know, don't just, I would say, don't think that you're immortal, don't think that you're, you know, it's not going to happen to you. You hear this all the time, I'm sure. But it really isn't hugely costly. And it can be one of the most important things you choose to pay for if you take out protection, whichever one or more of the three you choose to have. But yeah, make sure you don't over insure, you know, the term of the cover, the amount of cover, they are hugely influential in the amount that you pay, you know, instead of taking a life policy for 30 years, if your mortgage only runs for 20. And you think you're going to be financially independent in 15. You could look at a 15 year term or a 20 year term instead of a 30 year term, you know, it really makes a massive difference. Just one final thing, I guess I would say and this is particularly relevant, well, really only relevant for life covers. Please make sure you write your life covering trust. So important, it can be the difference between a loved one receiving an inheritance or your children, let's say receiving assets and an inheritance without getting attacked by inheritance tax versus being clobbered by a big tax bill. And it's so easy to do. It's so simple to do. All of the insurance companies provide trusts as part of their suite of documents, or you can go and see a qualified estate expert and they will be able to help you with trusts. But please, please, please get life cover written in trust. So important.
Christian Rodwell 34:50
Right. Thanks so much, Paul. And we look forward to the next episode where we'll be covering the business owner. So just give us a little summary who Who's Who's that episode four? And what what are some of the things they might be finding out about?
Speaker 4 35:06
I'm chomping at the bit to get started on that one already. It's all about, it's for you, if you are running a business that, you know, in most cases provides part if not all of your livelihood. And it's we're going to talk about different ways that you can not just protect yourself and your loved ones, but actually protect the business as an entity as an asset that's generating income for you. And even more than personal protection. So underutilised so few businesses have insurance when they could really do with having it, um, you know, got three or four different types of cover that, again, not complex stuff that we can talk about in really simple, easy terms. But, you know, I'd urge anyone who's got a business to listen into that one.
Christian Rodwell 35:54
Fantastic. Yeah, I can't wait for that one, too. All right. Thanks. As always, Paul, good to have you on today.
Unknown Speaker 35:59
Cheers, Chris. See? So.
Christian Rodwell 36:02
All right. So Paul got into the details there. And he is a detail kind of guy, but you can tell his experiences, his understanding of the topic there. And we'll dive into some of those points Kevin in a second. But let's look at Trustpilot. And I always love to shout out one of our members or followers or just someone from the community who's had a good experience. And this week, we have got a review. Let me scroll through. So I'm going to pick out one from ship and ship says I read Kevin's free eBook a few years ago, it helped me discover a few pillars I was not paying attention to and look into them, such as the pension SAS. I joined the wealth Academy to help me refocus on the seven pillars and ask some of my burning questions from experts like Manish Kataria, who is one of our wealth coaches. And the whole team Christian and others are very helpful and their education platform is worth the price. But it is just a tiny portion of the value they give wealth builders have got accountability systems, ongoing live training, coaching, community building and support to the tee, which is sound because it's them putting into practice what they preach. As this is one of the pillars they have executed perfectly. I can only see the academy growing. And he finishes off by saying I highly recommend wealth builders for anyone looking to build financial freedom using some of all of the Seven Pillars of Wealth that Kevin Whelan recommends, and a PS the free podcast. Wealth talk is a good starting point. If you're unsure if it's right for you,
Unknown Speaker 37:34
is that call ship Whelan or ship.
Christian Rodwell 37:37
The fan club.
Speaker 3 37:40
No, just you know could be from your brother or something, you know, the checks in the post. But it's lovely is that all of the things we want to be known for. We are known for and and thank you to ship for that. But I think I want to pick up on this thing, because really important. When we engage with people in the foundation of the academy, the first thing we ask them to do is assess what is their target level of income to be completely financially independent. Now we don't judge the number whether it's 3000 a month, 5000 a month 10,000 15,000. Or even I spoke to someone last week in London, it was 250,000 20,000 a month is what they wanted. Just don't do that. That's fine, whatever the outcome is, is what your outcome is, once you know that that's your outcome. The question that flows from that is if you're committed to that outcome for you, are you committed to that outcome for your family. Because if you're committed to the outcome for your family as well as you. In other words, if you as the engine that drives the wealth forward, let's say it's a person and member. And they obviously could be twos and threes and so on. Certainly couples work together very often. But let's say it was just one and you're driving it forward. If that engine ceases. packs up, we know cars run for 100,000 miles now. And some cars are got a warranty now for 100,000 miles, but some cars will pack in the big end will go. If your big end goes. Do you want your family to be able to go and have that level of income or not? Now if you do, you can then have two calculations to do. Where are you now on your GPS? And what's the gap? So if you stopped guillotine and your income stop, you were unable to focus mostly on live cover, let's say so the impact of death first. So if you were no longer to able to be the asset the engine that drives the assets forward. How much money would you need in a pot in order to provide that income for the next generation or your family? And you can work that out because you can work our what's the yield or the ROI that you'd be getting if you invested. So let's say you were good, you believed you could get 5% on your money, and I'm being very simplistic. And you needed 5000 a month, and you hadn't done anything at the beginning, right at the start of your journey, you need 60,000. So you multiply that by 20, you need 1.2 million in the bank in order to deliver that. Now, if that was the number, you would then look and say, Well, how much income have already gotten nothing? Right? Well, point two. How long is it going to take me in order to build that wealth? Well, my plan is five years. So let's assume, worst case, worst case 2010? They'll look 10 years, right? I'll then look at Do I have any other debt that needs to be repaid? And then I can total up exactly what I need? And then what am I going to get from other resources? So what am I going to get from my employer? All talked about death and service, which is basically a live shows policy paid for by the company to provide death benefits for its stuff. What's that? Well, if it's a multiple of your salary, and your salary was 50,000, that was four times, and four times 50 200,000, I now need 1 million. And then you just constantly evaluate that as to what it is you want to do if you want to fully protect. Whereas if somebody else has got an income user, while they will continue to work at some level, what do you want them to? Well, if you did, you could then scale backwards. From there. So you're making a conscious and deliberate decision on life cover at least, because that's fine. Now, when that kicks in, you're kicked out, right? There's no possibility, you get any money. And of course, Paul's absolutely right, you put it in trust, to make sure that if anything happens, that money goes straight to the family, you don't have to wait for wills, you don't have to wait for anything, I mean, assuming wills in place, and of course, we recommend that. But another point I would make Ali mentioned I will mention it is if you didn't want to do that calculation of the what would be the return I'd need 5% on the money, you can buy something called a family income benefit policy, FYI be for sure that all these fancy names, but same a result, what's the result, a monthly income for your family. Now, in some respects, that's cheaper. Because the insurance company doesn't have to stump up a million in one, go, bang, death equals a million, they go, Well, we're going to pay the family for the next 10 years. So therefore, they're spreading the payment of that overtime. So that can be a little bit cheaper to do that way. So it's a combination of thinking and assessing the risk. What is the contribution from anybody else? Now, if you've got, for example, a big pension fund, you've been accumulated pension, that's death benefits as well. So you'd add that you wouldn't add your state pension because your state pension is not going to pay you till much later. So you've looked at death benefits from work the value of your pension from all sources, get somebody to help you if you can't do on your own. And as Paul said, many advisors will do it for a few 100 pounds, 1000 pounds probably at most, and give you a real thorough assessment of what your needs are, then your options. And then when you get all the figures, you can look at it and say, Do I want to fully insure on the insurer or just accept the risk? Once you make a decision, you've got clarity. And then that's really what you do. So when it comes to life cover, I think is really quite simple. And once you become financially independent, you could argue you don't need any cover at all. Now, notwithstanding that there are many of our members, Chris, you've got leverage on property. And if interest rates go up, that becomes weaker. So there might be a value in maintaining some cover to reduce debt, for example, if you've got leveraged debt, but again, that's just a calculation that you would assess. Do you want to be fully debt free in your family? Or do you want to be bartered Great? Certainly we have debates with clients just conversationally, not giving advice, but what level as a percentage of your total debt Do you want to have some home to visit 50%? So if you've got a portfolio with 2 million, your mortgage can be no more than a million. So you pay down the rest? I don't know. But everybody is different in that regard. But the best thing to do is make that decision, just as you're different and unique as you build your wealth. So you should be unique and different and how you protect her out that gives you a more universal qualification to backup and substantiate calls in more detail. Old description, although we did forget afib. So
Christian Rodwell 45:06
we'll pull him up on that when we next see here, but no, I think that does balance things out really nicely. So thanks for explaining that, Kev. And as we said, we're doing a second episode around this topic next week. And Paul, again, will be coming in and this time focusing on the different types of cover for business owners specifically,
Speaker 3 45:27
yeah, albeit, the live cover pieces. Same, if you're a director of a limited company, he's still got personal needs, but there's difference there, and I'm sure, we'll cover next time, which is you get some tax breaks. So whenever you buy insurance, there's a person you're paying for it with after tax pounds when you buy insurance, but other than the company death and service benefit, which is normally tax free, certainly the proceeds are tax free, again, fill out the form to make sure it's interest. That way, you're keeping the proceeds to the benefits tax free for the next generation. But the fact that whenever you've got a business, you can treat the payment of the cost of that as a business expense in your own business. So therefore you're paying with pre tax pounds. And if currently Corporation taxes 25 P in the pound, you got a 25% reduction in the cost of insurance, at least that because you don't have national insurance to pay in other things to pay. So it could be 50 60%, or certainly getting on for that lower, certainly 50% It could be. And if it's 50% cheaper, then either you accept that the cost to insure you is less, which is good news, or you have more cover than and you've fully mitigate. Right. So you've got a much better balance of choices, when you have a business than you do when you're growing individual.
Christian Rodwell 46:59
So there's a little teaser to make sure you tune in for next week. And hope you enjoyed listening today. As always, if you think somebody else you know might benefit from what we've been discussing, please hit the share button. And hopefully they'll discover the world wealth, talk for themselves and be in time for our big 200th episode, which is so so close. Now, Kevin.
Speaker 3 47:19
Yeah. And look, we make no apologies for getting into the nitty gritty of things, because often is by doing that, that it serves, people's needs to dive a little bit deeper for themselves, especially the DIY, as you know who wants to do it, all the ones who want to get an advisor, you well briefed, because you now knowing what the advisors having to consider, and they have an obligation to do the best thing by you. And I think you made a great point about avoiding but what you didn't say avoid, I'm gonna say avoid, avoid long term insurance just because it's sold to maximise commissions. And we see that don't we, we see people recommend something to maximise the revenue to them, as opposed to minimise the cost to you. Or at least make it a fair balance. Because you may need cover for 2030 years you may and if you do, there's nothing wrong with that. As long as you feel confident, the advisors assessing your needs and helping you because you need to understand the cost to make a decision. And you can't really do that with comparison sites, particularly if you've had a health condition. Paul talked about a guy with diabetes who unfortunately passed. You could be you could have a dangerous sport or hobby. I know it's pretty dangerous with you on the golf course go. So I try and stay behind you. You know what I mean? There could be dangerous things that are going on in your life. One of our clients is a glider. And you know, so the fact that he glides many, many hours, which means his insurance will be higher. So you have to consider that. What do you want to do give up gliding now, why don't I want to do gliding? Well, therefore, you have to consider that in assessing your risk as well. So one of the things your lifestyle, your health style, and your decision making style will all come into play. And I would suggest anybody finds an advisor they're comfortable with and as a good conversation, a robust conversation. And just don't duck it is all too easy. Like my dad to go. I'm invincible. Nothing's going to happen to me. Until one day it does. And instead of having your family moving forward in tragedy, but you benefit from their good planning. You don't you send them backwards and that's definitely not something I would recommend to anybody.
Christian Rodwell 49:33
Well, I'm off for a swim in the sea. Now Kevin slow hope there's no sharks otherwise, my premise might increase as well. So
Speaker 3 49:39
yeah, not too many sharks on the south coast. The ball should close especially with your body's not enough meat on your belly.
Christian Rodwell 49:46
That's true. That's true lane. All right. So thanks again for listening. Hope you enjoyed today's episode. Kevin. We'll catch up Same time, same place next week.
Unknown Speaker 49:54
We will indeed unless the sharks get Yeah, see ya.
Speaker 1 50:00
We hope you enjoy today's episode. Don't forget that we are constantly updating our resources inside the wealth builders membership site to help you create, build and protect your wealth. Head over to wealth builders.co.uk/membership right now for free access. That's wealth builders.co.uk/membership
Transcribed by https://otter.ai