Your financial plans might be focused on saving for retirement or maintaining an investment portfolio. Having a long-term plan can give you a sense of control and confidence in your financial future.
It is also important that you plan for the unexpected. The rapid spread of Covid-19 has highlighted the speed with which our lives can change. Good health, a stable job, and a regular income can all be compromised when the worst happens.
Having financial protection in place can give you peace of mind that you and your loved ones will be protected, whatever the future brings.
1. Peace of mind
Life insurance can give you peace of mind that your family will be financially secure should the worst happen. You might worry that it will be prohibitively expensive. However, there are many different types of life insurance available, so speak to us if you are unsure about your options.
There is no average cost for life insurance. Different types will have different costs attached, and the one you opt for will depend on your circumstances and needs. We can help find the right one for you, which might cost less than you think.
You might consider:
- Term assurance
Term assurance pays out a “sum assured” if you die within a specified term. For example, you might take out a policy for £200,000 of cover over a 25-year term. The sum assured will pay out on your death, if it occurs at any point within 25 years from the policy start date.
- Decreasing term assurance
With decreasing term assurance, you again decide on a sum assured and a policy term. The plan will pay out on death during that term, but the sum assured will decrease over time. This can make for a cheaper option than regular term assurance.
- Whole of life cover
Whole of life cover guarantees to pay out on your death, whenever it occurs. This makes whole of life cover potentially more expensive.
The premiums you pay will be guaranteed or reviewable. Guaranteed premiums never rise but reviewable ones could – and almost certainly will – increase as you get older.
2. Protecting the things that matter to you
If you have dependents reliant on your income, stopping work through accident or illness could have a significant impact. As well as paying your household mortgage, you might be helping a child through university or paying a parent’s care-home fees.
Ensuring that these payments can still be made, even if you have to give up work, is vital. But what sort of protection might you need?
- Income protection vs critical illness
Income protection pays a regular sum to cover a portion of your lost earnings if illness or an accident prevents you from working.
It will start to pay after a deferred period (this might depend on the amount of full pay you receive from work during a period of sickness) and is likely to cover most illnesses that could prevent you from working.
You can claim multiple times and the amount you receive – though not equal to your full wage – should help you and your family to pay your regular bills.
Critical illness will pay out a lump sum if you are diagnosed with certain conditions. These will need to be set out in the policy and might include a stroke, heart attack, and certain cancers. Critical illness will only pay out once.
Depending on the size of the cover, you might use the lump sum to pay off your mortgage (giving you peace of mind that your family is financially secure and looked after), pay for treatment, or help towards modifications to your home. Read our guide to Critical Illness cover: What it is and why you need it to find out more.
- You might benefit from having both
Although both forms of protection cover you against accident or illness, there are also many differences. How they pay out, when, and under what circumstances could all be different.
You might find that the differences complement each other to provide fuller protection, and therefore you could benefit from having both critical illness and income protection in place.
- But will your policy pay out?
As well as cost, another common worry about protection plans is that your policy won’t pay out when you need it.
Research from Aviva in 2018 found that 55% of consumers felt that their insurer would try to avoid paying a protection claim.
However, the ABI recently confirmed that, in fact, 98.3% of protection claims were paid out in 2019.
3. Protection can come with other benefits attached
Protection policies will often come with added benefits. If you already have protection in place, you might have some of these already without even knowing it:
- Children’s critical illness cover
Your critical illness cover might have “children’s critical illness” included as part of your policy. It’s not something any parent wants to think about, but a lump sum payout, should the worst happen, could help with treatment or care.
- Support for your mental health
Your cover might include counselling to help if you are struggling with your mental health. If you have protection currently, check if mental health support is included.
- Gym membership discounts
If you have had an accident and need to regain your fitness before you return to work, discounted gym membership could help you get back on your feet at a discounted price.
Get in touch
If you have dependents reliant on your income, consider putting protection in place. Knowing you have guarded against the unexpected will give you peace of mind and confidence that your loved ones will be financially stable if the worst ever happens.