Do you need income protection insurance?

Do you need income protection insurance?

You may already have a life insurance policy that provides for your family in the event of your death. However, it’s also worth considering a different scenario to understand if you need income protection too.

Introduction

Imagine if you couldn’t work due to serious illness? Could you and your family make ends meet on just your sick pay and/or savings? If you’re concerned about this, then take advice from your financial adviser. It might be that you should consider income protection insurance.

So, what is income protection insurance?

Put simply, income protection insurance will help you in the event that you are ill or injured and cannot work for a period of time.

What does it do?

  • It will replace a portion of your income if you can’t work due to illness or disability.
  • It will continue to replace this portion of your income until you are able to work again, or until you retire, reach the end of the policy term, or die – whichever is sooner.
  • Be aware, you have to wait a certain length of time before the payments start. For example, payments may start after your sick pay ends.
  • It covers most illnesses that leave you unable to work, either in the short or long term, however this will depend on the policy and the definition of being unable to work. You should discuss this with your financial adviser.
  • You can make more than one claim on a policy. Basically, the cover is there for you for as long as the policy lasts.

So, do you need it?

Income protection insurance can provide peace of mind whether you have a family or not. So, it’s worth considering carefully. If you’re concerned that you won’t be able to pay your bills if you fall sick – you should discuss income protection insurance with a financial adviser.

If you are self-employed, or your employer doesn’t offer you anything other than statutory sick pay if you are ill, then it’s possible that you’re even more likely to need income protection insurance.

However, there are instances when you might not need it. If you’re comfortable at the thought of getting by on just your sick pay or your partner’s pay, government benefits, your savings, or even the prospect of taking early retirement, then you may not need it.

What affects the cost of income protection insurance?

Obviously, every policy has it nuances, but income protection insurance can cover a wide range of illnesses. Factors that affect the monthly cost of your policy, include:

  • Your age
  • Whether you are a smoker
  • Your medical history and current health
  • Your occupation
  • How much of your income you’d like to cover

Things to check…

Different providers and different policies offer different types of cover, so it really is important to consider getting advice from a financial adviser.

You should bear in mind that income protection insurance is not the same as critical illness insurance, which pays out a one-off lump sum if you have a specific serious illness. And it’s also not the same as short-term income protection, which although also pays out a monthly sum will only do so for a limited period of time (normally between two and five years).

Other types of insurance to consider…

If you’re interested in finding out more about the different types of insurance available to you, click the links below:

 

 

Do you need critical illness cover?

Do you need critical illness cover?

It can get a bit confusing, all this talk about insurance cover and protection. It’s possible you already have life insurance (more information available here, if you don’t). You may also have income protection. But there’s another type of protection that will pay out a tax-free lump sum as a one off payment to help cover debts like your mortgage, or cover the cost of make changes to your house to accommodate wheelchair access, for example, should you need it.

So, what is critical illness cover?

Critical illness cover specifically covers a set of medical conditions or injuries that are listed in the policy. It doesn’t cover every medical condition, and it can depend on how serious the condition is before it pays out. If/when required, the policy will pay out once and then the policy ends. There are variations on this, however, so it’s a good idea to discuss your requirements with your financial adviser.

Examples of conditions that might be covered include:

  • Heart attack
  • Stroke
  • Certain types and stages of cancer
  • Conditions such as multiple sclerosis

What does critical illness not cover?

A critical illness policy will not cover a condition if it’s not listed in the policy. Also, it’s likely that any pre-existing health problems you have will not be covered either. And one final point is that it’s not life insurance, so it isn’t designed to pay out in the event of your death. It’s important, therefore, to pick your policy carefully and understand exactly what you’re paying for. Your financial adviser will be able to give guidance on this.

So, do you need it?

If you’re concerned that you won’t be able to pay off your mortgage, for example, if you fall prey to a critical illness, then this type of cover is something you should consider. However, you might not need it if you have adequate savings to rely upon to cover your mortgage, your partner can cover your living costs adequately in the event that you fall ill, or your employer offers benefits that do this too.

What affects the cost of critical illness cover?

Factors that affect your monthly premium include:

  • Your age
  • If you’re a smoker
  • Your current health and medical history
  • Your occupation
  • The amount of cover you want

Other types of insurance to consider…

If you’re interested in finding out more about the different types of insurance available to you, click the links below:

Do you need life insurance?

Do you need life insurance?

This may sound daft, but many people don’t stop to ask themselves this question. And it is one that needs to be asked. So, here’s a little information on the subject to help you understand what you need to consider in order to be able to decide for yourself.

Introduction

First things first, not everyone needs life insurance. However, if your family depend upon either just you, or you and your partner, for income to cover your mortgage and other living expenses, then you need to at least consider it. In the event of your death, it will help provide for your dependents.

So, what is life insurance?

You won’t be surprised to learn that there are many different types of policy available to you. However, in essence, a life insurance policy is designed to provide your family with either a lump sum, or regular payments, in the event of your death. How much they will receive depends on the amount of cover you take out. And it’s worth noting that you can take out policies for specific things like your mortgage if you’d prefer. The best thing to do is discuss your particular circumstances with your financial adviser so that they can point you towards the most appropriate product for you.

What does life insurance not cover?

As the title suggests, it covers only death. So it isn’t a policy designed to provide for you and your family in the event of illness or disability.

Also, you should be aware that many policies will have certain exclusions. For example, if you die as a result of drug or alcohol abuse, this may not be covered. Risky hobbies may require an additional premium. And if you already have a serious health problem, this may be excluded too. Make a note of everything and talk it through with your adviser. There may be other types of policy available to you to cover exclusions, long term illness, and critical illness, which might meet your requirements better.

So, do you need it?

The question to ask yourself first is this: ‘What will happen to my family’s ability to pay the bills and mortgage if I die?’. The government cannot be relied upon to take care of them in the manner in which you’d probably like them to be looked after. And if this is the case, then you really do need to consider a life insurance policy.

However, if you’re single or your partner earns enough for your family to live on, you may decide that life insurance isn’t necessary.

Is it expensive?

It’s not really appropriate for us to answer that directly, because the answer is relative to your circumstances and approach to your family’s finances. However, many people deem it to be good value. For just a few pence a day, you may have access to a policy that will provide your family with the protection they need in the event of your death. Though, of course, this is always subject to your age and health status.

First off, ask your financial adviser to provide examples of the cost of different policies. Premiums do vary, and they will know which institutions can offer the best products for your situation.

What affects the cost of life insurance?

There are many different factors that can affect the size of the premium. However, examples include:

  • The sum you wish to cover
  • The length of the policy
  • Your age
  • Your health
  • Your lifestyle
  • Whether you smoke, etc.

Things to check…

Before you decide to take out a life insurance policy, it is worth checking if your employer already provides one. However, if you find you do have some sort of cover as a benefit, then it’s also worth checking that it provides enough. If it isn’t enough, there is no reason you can’t take out an additional life insurance policy to make up the difference. Of course, if you stop working for that employer in the future, you won’t have the benefit of their policy any more.

Other types of insurance to consider…

If you’re interested in finding out more about the different types of insurance available to you, click the links below: