Don’t be caught short

Obtaining life insurance, critical illness cover or income protection is, for many, the least enjoyable aspect of financial planning. Perhaps it is because protection issues are so daunting that Britain remains such an underinsured nation: it is estimated that more than 18 million British adults have no life insurance.

What kind of insurance you need, and how much, depends on who you are. If you are single, do you need life insurance? In general, the answer is no.
However, you should consider that life cover is cheaper the younger and healthier you are, so if you think that you may need cover later on, it might be worth getting it early.

There are other issues to consider. If you have a mortgage and you die, the bank will sell the house and recoup its money. Anything left over goes to your estate. If you would like your property to remain part of your estate, you should take out insurance to cover the mortgage.

Moreover, if there is a chance that your property could be worth less than your mortgage loan, you need to consider the impact on your estate, as your debts do not die with you.

Those issues aside, life cover is not necessary for a single person, so what protection should you consider? In the generic pecking order, income protection should be seriously considered. Income protection, which used to be known as permanent health insurance, gives you a tax-free replacement income until you are well enough to return to work, you retire or you die.

Income protection policies pay out if you are unable to work because of illness, but it is possible to buy extra cover in case of unemployment. Premiums are fixed and will not rise regardless of how many times you claim. Moreover, the insurer cannot exclude a condition, such as a bad back or stress, simply because you have already made one claim.

Ideally, you should also consider a critical illness policy. Income protection allows you to keep living your daily life, but critical illness cover can clear debts, help to pay for treatment or for amendments to your home. However, unlike income protection policies, critical illness policies have a list of conditions for which they will pay out.

Couples, especially those with children, should obtain life cover before they consider protecting their income. Which sort of life cover depends on your circumstances.

Young families may wish to consider family income benefit instead of standard life cover. This pays out an income rather than a lump sum.

If you would like to discuss your protection requirements,
please email or contact us.