Life Insurance
Life Assurance
What is life cover
Life insurance, is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of an insured person. Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policy holder typically pays a premium, either regularly or as one lump sum. Other expenses can also be included in the benefits
Critical Illness Cover
What is critical illness cover?
Critical illness insurance will pay out if you get one of the specific medical conditions or injuries listed in the policy. But be aware that not all conditions are covered and policy will also state how serious the condition must be.
Every year 1m workers in the UK unexpectedly find themselves unable to work because of injury or illness, according to the ABI.
Examples of critical illnesses that might be covered include:
- heart attack
- stroke
- certain types and stages of cancer
- conditions such as multiple sclerosis
Most policies will also consider permanent disabilities as a result of injury or illness. It only pays out once and then the policy ends. Some policies will make a smaller payment for less severe conditions, or if one of your children has one of the specified conditions.
What isn’t covered?
Some serious illnesses might not be covered, for example, some cancers and conditions not listed in the policy.
You probably won’t be covered
for health problems you knew you had before you took out the insurance, and this type of insurance does not pay out if you die.
What’s covered and what’s not, will be set out in the policy details so make sure you’re fully aware of them and that they cover your needs.
Do you need it?
State benefits might not be enough to replace your income if something goes wrong. If you’re eligible, welfare benefits range from around £70 a week to just over £100 a week, depending on your circumstances (i.e. whether or not you have children, a certain level of savings, or if your partner works).
Critical illness cover could be considered if:
- you don’t have savings to tide you over if become seriously ill or disabled
- you don’t have an employee benefits package to cover a longer time off work due to sickness
Who doesn’t need it?
You might not need it if:
- you have enough savings to fall back on and can adequately cover expenses such as bills, loans, medical costs or a mortgage
- you have a partner who can cover living costs and any shared commitments, like a mortgage
Income Protection
What is income protection insurance?
Income protection insurance is a long-term insurance policy to help you if you can’t work because you’re ill or injured.
- It replaces part of your income if you can’t work because you become ill or disabled.
- It pays out until you can start working again, or until you retire, die or the end of the policy term – whichever is sooner.
- There’s a waiting period before the payments start. You generally set payments to start after your sick pay ends, or after any other insurance stops covering you. The longer you wait, the lower the monthly payments.
- It covers most illnesses that leave you unable to work, either in the short or long term (depending on the type of policy and its definition of incapacity).
- You can claim as many times as you need to, while the policy lasts.
- It’s not the same as critical illness insurance, which pays out a one-off lump sum if you have a specific serious illness.
- It’s not the same as short-term income protection, which also pays out a monthly sum related to your income, but only for a limited period of time (normally between two and five years) and can cover fewer illnesses or situations.
Do you need it?
- According to the ABI, one million workers a year find themselves unable to work due to a serious illness or injury.
- It doesn’t matter whether or not you have children or other dependants – if illness would mean you couldn’t pay the bills, you should consider income protection insurance.
- You’re most likely to need it if you’re self-employed or employed and
you don’t have sick pay to fall back on.
Check what your employer will provide for you if you’re off sick.
Who doesn’t need it?
You might not need income protection insurance if:
- You could get by on your sick pay – for example if you have an employee benefits package which gives you an income for 12 months or more.
- You could survive on government benefits – but they might not be enough to cover all your outgoings
- You have enough savings to support yourself – remember that your savings may need to see you through a long period.
- You could take early retirement – if you’re near retirement age, perhaps you could afford to retire early. If you are unable to return to work you may be entitled to take your pension early.
- Your partner or family would support you – perhaps your partner has enough income to cover everything the two of you need.
How much does it cost?
How much you pay each month will depend on the policy and your circumstances. Usually income protection insurance covers a wide range of illnesses and situations and has the potential to pay out for many years.
The cost of a policy will vary based on a number of factors, including:
- Age
- Whether you smoke or have previously smoked
- Health (your current health, your weight, your family medical history)
- Job
- The percentage of income you’d like to cover
Mortgage Protection
Mortgage Protection Insurance
A mortgage is the biggest financial commitment most of us will ever take on and if for whatever reason you’re unable to work you will still be expected to make your repayments.
Although if the worst were to happen the state will provide a very basic safety net – such as jobseekers allowance – benefits will not give you anywhere near enough money to pay for your mortgage and other living costs. So it makes sense to take out some form of mortgage protection insurance.
Online quote Mortgage Protection
There are a range of products on the market you can take out to give yourself peace of mind that you will be able to meet your mortgage repayments. Income protection insurance is the best option for most people as it provides the most comprehensive protection. But if you’re on a tight budget, income protection can be expensive, so it may be worth considering mortgage payment protection insurance.
