Weddings have been in the spotlight with the marriage of Prince Harry and Meghan Markle, but what happens once the honeymoon is over?
Here we look at how newly married couples can protect themselves financially.
Many will want to buy a home if they do not already have one.
Protection is required to repay a mortgage in case you die during the term. Mortgage protection is a decreasing term assurance policy where the cover reduces in line with your mortgage over the loan term.
The amount of cover required is the mortgage balance at the outset or the amount remaining at the time you would like to put cover in place.
You may be allowed to increase cover if you move home and increase the balance of your mortgage, or a new policy could be taken out for the difference or full amount.
Term assurance can provide a lump- sum benefit on death. The benefit can be level or increase each year over the term until it expires, which is normally retirement age.
It is also possible to take out single life policies on life of another basis, where the party to receive the benefits takes out cover on their spouse’s life.
The question is how much is needed as a cash lump sum on death? The answer can be broken down into two parts.
Firstly, immediate obligations: for example funeral costs, other debts, children if applicable, (this can include or exclude mortgage, university costs, estate settling costs etc).
Secondly, future income to sustain the household. This is the present income of your family home that will be required upon death. It is important to consider that if someone is home looking after children more income may be required to cover childcare.
Meanwhile, many of us know someone who has suffered from a serious illness.
Macmillian Cancer Research documented that in 2015 2.5 million people were living with cancer.
Critical illness cover can offer a degree of financial security and will pay a lump sum if you were diagnosed with a defined condition. Like term assurance, the benefit can be level or increasing.
The cover can be stand-alone plan or an additional benefit to mortgage protection or term assurance.
The term can coincide with retirement age, children grown up, or your mortgage coming to an end.
The sum assured is calculated similar to term assurance: what financial commitments are in place, and what future income is required to sustain the household over a specified period.
Although the royal newly weds will not have to worry too much about protecting their income, in reality this is something we need to consider.
How would you cope day to day if you or your partner were unable to work due to sickness or injury?
Income protection can provide a benefit to replace any loss of earnings to help everyday living expenses if you were unable to work due to sickness or injury.
The benefit can be level or increase each year. Costs are based on four occupation classes, and there is the option of cover being set up on own or suited occupation activities of a daily living bases.
To calculate, the benefit can be 60% of gross annual salary up to £60,000 and 50% of any above this amount.
Once a claim is made there is a deferral period from four, 13, 26 or 52 weeks before the income starts, and once you return to work the cover will restart.
Harry and Meghan don’t have family at the moment, but they might be feeling broody following the recent arrival of their nephew Prince Louis.
Unlike term protection, family income protection provides a benefit for a family and their young children that is paid yearly from death until the term of the policy ends. It is possible for the benefit to be paid on a level or increasing basis.
The term is normally in line with the expectation of when the children will become financially independent.
To calculate the benefit required you will need to include all current expenditure and expected future spending. For example, school or university fees should be taken into account.
Most newly wedded couples will start to think about the future and what it holds, but they also need to consider how to look after each other if the worst should ever happen.
There are many other types of protection to consider but they all depend on the individual situation. The costs involved with all protection depend on personal circumstances and are underwritten before the plan is put in place; some pre-existing conditions could be excluded.
Most plans can be based on a joint or single life basis. There are many additional cover options that can be added on guaranteed rates, meaning the premiums stay the same throughout the term, and waiver of premium where the costs will be paid if you were unable to work due to illness.
Many people in their twenties and thirties can have a ‘live for the moment’ attitude and don’t want to think about the inevitable, but can we afford not to?