Protecting your family

This blog was written by our sister firm Aquila Financial Services, a leading provider of financial planning and wealth management solutions. Aquila helps clients achieve their financial goals and secure their future with personalised advice and tailored strategies. Whether you're seeking advice on investments, pension planning, or wealth management, Aquila has the expertise and experience to guide you.

As a farmer, you undoubtedly have various insurances in place for vehicles, buildings and public and employer liabilities. 

However, cover for the business owners/partners personally is often overlooked.

Life cover

Life cover can be arranged comparatively cheaply (depending on age) to provide a lump sum on death; perhaps to fund the repayment of a loan, to buy out the deceased’s share of the business or to pay inheritance tax.

Income protection

Another type of cover is designed to provide protection should someone be incapacitated due to accident or illness.  Income protection policies can provide a monthly benefit which could be used to reduce the drawings from the business or fund the cost of hiring a temporary replacement.  

Scenario

Fred and Jenny Jones are in their 70’s and still actively involved in running their dairy farm with their son Mark, and his wife Susan.  Mum and Dad live in the farmhouse and Mark and Susan in a barn conversion on another part of the farm.  Given his parents’ age, Mark does the majority of the manual work on the farm (Susan is a teacher) and draws £2,000 a month from the business. 

They have invested heavily over recent years to grow the business, and do not have spare cash resources. 

One day, Mark is medicating a cow and gets crushed against a wall in the cow shed.  He is badly injured and the doctors inform him that it may take a year to eighteen months for him to be fully fit.

Aside from the personal aspects, this puts the family in a difficult financial position; they need to employ someone to temporarily replace Mark, but Mark and Susan still need to draw an income from the partnership to cover their living costs. 

Outcome

Fortunately, Mark had previously arranged income protection cover.  Mark submits a claim to the provider; this is agreed, and the policy becomes payable after the deferred period of three months. 

Mark receives a benefit of £2,000 per month, tax free, for up to 24 months from the policy.   The premium paid was under £25 per month.   

Mark could instead have chosen a policy that would have been payable until age 60.  The premium for this would have been more expensive (around £52 per month) but it would have given him the security of knowing that the benefit would have been paid until close to his retirement age if he had been permanently incapacitated.

If you would like to discuss any of these aspects in more detail or have any questions, don't hesitate to contact us.

Let's secure your financial future together.