Back in 2015, Actuarial Post published the results of a SunLife study into life insurance. The survey looked at consumers’ perceptions of cost and found that UK adults were massively overestimating the price of protection.
The coronavirus pandemic has forced a shift in attitude towards protection. And while the latest reports show an upsurge in interest, myths around the unaffordability of protection remain.
If you don’t have protection in place, remember that covering yourself and your loved ones could be much cheaper than you think, and much less costly than the alternative.
Keep reading for everything you need to know about life insurance and the other forms of protection your family might need.
Even those with “no idea” of the costs involved believe protection is unaffordable
The SunLife survey found that Brits overestimate the price of a loaf of bread by 43%, on average. For life cover, though, the figure was 394%.
While many respondents overestimated the cost, others admitted having “no idea”. Worryingly, more than half (53%) of those who cited affordability as the reason they weren’t covered admitted having “no idea” of the true cost.
More recently, a 2021 report published in Professional Adviser and conducted by Hymans Robertson looked at changing attitudes in the wake of the pandemic.
This study found that 39% of consumers were more likely to buy protection insurance as a result of coronavirus. And while knowledge of the costs involved appears to have improved in the last seven years, nearly a third of those surveyed (31%) still believed that protection policies were too expensive.
Coronavirus has forced Brits to revisit the value of protection
Reports suggest that protection products might be cheaper than you think. When weighing up the cost of monthly premiums, it’s important to consider the financial consequences of not having protection in place.
A loss of income through accident or illness could make household bills hard to meet, while a death before a mortgage is paid off could leave your nearest and dearest struggling to keep a roof over their heads.
Here’s a look at the main types of cover you might consider:
Life insurance
The impact of Covid has made 35% of UK adults consider life insurance. Term cover, according to Unbiased, could start from as little as £5.83 a month, although the amount you pay will depend on your circumstances, including age, lifestyle, and medical history.
On average, monthly premiums across all types of life cover range from £15.85 to £30.40.
Term insurance – paying a set amount on death during a specified term – is likely to be the least expensive on average, while whole-of-life cover will be more expensive. This is because whole-of-life cover guarantees a payout on death, whenever death occurs.
Critical illness cover
The pandemic has caused 37% of UK adults to consider critical illness cover. It can be more expensive than life cover because claims are more likely to be made during your working life. According to a recent Times report, a 40-year-old non-smoking male, for example, is more than four times more likely to suffer a critical illness than die before the age of 65.
You might consider critical illness cover alongside life cover, especially where the income lost through illness would make it difficult for you to pay off your mortgage. You might take critical illness protection out to cover the years remaining on your mortgage. You can opt for a decreasing term, meaning that the payout you receive would diminish as your debt decreases, likely making this option cheaper.
The Times report suggests that £150,000 of level-term life insurance with critical illness cover over 25 years could cost as little as £34.09 a month for a 30-year-old non-smoker in good health. Taking out cover later in life is likely to cost you more.
Income protection
The pandemic made clear how quickly our lives can change. Professional Adviser’s report confirms that 34% of those who became interested in income protection did so because the pandemic has made clear the extent to which a loss of income could detrimentally affect their lifestyle.
The cost of income protection varies massively depending on your age, your health, and the job you do, among other factors.
A recent Times report suggests that as a 32-year-old non-smoking male with an office job and no existing health conditions, you could expect to pay a monthly premium of around £33. This would provide you with a long-term income of £1,250 a month after a four-week deferral period.
Your premium would rise to around £84 if you took the same protection out at age 52.
There are added benefits to protection policies too
While you might concentrate on the payout your financial protection plan provides, there could be added benefits too.
From discounted gym memberships, free cover for children or help towards a funeral, be sure to make the most of your protection product by researching the extras it offers.
Professional Adviser reports that these added benefits are an important factor for those choosing protection. The three extras deemed most likely to encourage consumers to take out a plan were:
- Legal services (34%)
- Health and wellbeing services (27%)
- Access to virtual GPs (26%).
Get in touch
Protection products are vital in helping you and your family withstand the financial shocks that can accompany a sudden illness or death. From helping to pay off a mortgage to keeping your children in school, or simply paying household bills until you get back on your feet, this crucial cover can be cheaper than you think.
Choosing the right plan for you isn’t always easy though. If you’d like help managing your financial protection products, get in touch. Please email hello@globeifa.co.uk or call us on 020 8891 0711 to discuss how Globe IFA’s expert financial advisors can help you.
