personal insurance 101
If the ongoing pandemic has taught us anything, it’s that things can completely change overnight, leaving you to deal with a new situation that you didn’t see coming.
You would think that this year would have made people more willing to get protection for themselves and their families, but this actually isn’t the case. Although there’s been an increase in protection interest, the average Brit would still rather buy pet insurance than life insurance! This usually comes down to people not knowing what kind of insurance they need and thinking that they can’t afford it - but protection really isn’t that expensive, and it’s there to provide a financial cushion to fall back on when life takes an unexpected twist or turn.
There are many insurance options out there, but today we’ll focus on the three most common types: life insurance, critical illness, and income protection cover.
Life insurance
Nobody likes to think about a time when they’ll no longer be around, but it’s important that you make the necessary arrangements.
It’s entirely possible that your dependents or your family might become responsible for your debts or expenses. Even if you’re someone who’s very good with personal finances and you have no outstanding debts, you should still think about your family’s future - life insurance is all about making sure that your loved ones are taken care of financially.
You should consider this especially if:
You are paying off a mortgage
You have children
You want to leave an inheritance
You want to cover funeral costs
Other good reasons for getting life insurance are:
If you get a life insurance policy ‘in trust’, you can legally avoid inheritance tax which means your children will receive their inheritance in its entirety.
Through most life insurance policies you have direct access to a GP 24hrs a day.
Remember, your age is one of the primary factors influencing your life insurance premium rate; the earlier you obtain life insurance the cheaper it will be. There are several other factors influencing your premium rate including any medical conditions, your weight, smoking and alcohol status, age, family history and gender.
Critical illness cover
This plan offers financial protection if you are diagnosed with a serious illness or suffer an injury. The government does offer some support for those with long term sickness, however, this might not be enough to support your new circumstances. Critical illness cover is specifically designed so that you and the people that depend on you are able to adjust to the change without it hurting your finances.
How does it work? If you’re diagnosed with an illness that is covered by your policy, in most cases you’ll receive a tax-free, one-off payment that you can use however you like: to pay off the mortgage, or simply to lighten the financial burden. The illnesses that are covered vary slightly between providers, but the main conditions include heart attacks, strokes and cancer.
Income protection
Income protection insurance is essential if you want to continue paying your bills if you suddenly find yourself unable to work due to an illness or injury. Because this implies a longer period of time, most people wouldn’t be able to survive solely on savings or sick pay.
It might sound similar to critical illness cover, but the two are not the same: income protection covers you for the whole time you are unable to work due to illness or injury, unlike critical illness cover which is usually paid out in one lump sum. It continues to pay out until you are well enough to start working again, retire, or pass away.
Income protection is something to consider if you are self-employed or employed without sick pay to rely on. However, we should highlight that this type of protection doesn’t cover you if you are dismissed or made redundant.
There are so many insurance policies to choose from, and we know that picking the right one for you can be challenging. If you’d like some expert advice on all thing’s protection, contact us and we’ll be able to explain your options in detail.
